Congress passed a bill this June that will extend the lowered interest rates on Stafford student loans. The bill maintains the loans' interest rate at 3.4 percent for one additional year, preventing the loans from doubling to 6.8 percent, according to Tufts' Director of Financial Aid Patricia Reilly.
"[Congress] lowered the rate over the course of four years and then had the whole thing expire at the end of those four years, which is what put us in the place that we are now," Reilly said. "One year is better than no years, but it's certainly not a long-term plan. The interesting thing is that 3.4 percent is actually the lowest rate in history."
The Stafford loan is a government-subsidized, need-based loan that helps undergraduate students pay for college. All eligible students receive the same loan amount, totaling $17,125 over four years, according to Loan Repayment Counselor Judi Kennedy.
"The Stafford is a guaranteed student loan, so everybody gets the same, but it's need-based," Kennedy said. "If you didn't qualify for subsidized, you would get unsubsidized, which means the interest will continue to accrue while you're in school. [With] the subsidized, that interest is not accruing until you go into repayment, which is six months after you graduate."
Kennedy explained that the standard repayment for the loan over 10 years at the 3.4 percent interest rate runs at about $191.23 per month for a total of $22,947.50, while the loan at the 6.8 percent interest rate would run at $239.75 per month for a total of $28,770.
"This 3.4 percent is definitely a benefit to people who have to take financial aid in regards to paying their loans, because ultimately that monthly payment is going to be lower," Kennedy said.
Between 40 and 50 percent of Tufts undergraduates have loans covered by this extension, according to Reilly. Graduate students, who typically borrow far more than undergraduates, do not receive the lowered interest rate. Likewise, students with an unsubsidized Stafford loan will continue paying 6.8 percent.
Reilly said that incoming students are usually more concerned about the availability of the loan than about the rate of interest attached.
"Because these are undergraduate students, the difference over the course of four years is low enough that it's typically not going to change behavior," Reilly said. "It certainly didn't change behavior when the rate went down. There may be a few students who decide that it's just not worth it, but I don't think that's likely."
In addition to addressing student loan interest rates, the Obama administration in July released the final version of its new financial aid "Shopping Sheet," according to the Department of Education website.
The "Shopping Sheet," which will be available beginning in the 2013-2014 academic year, compiles financial award data from participating universities to help students compare the financial aid awards from each school that accepted them.
"We must make it easier for parents and students to finance their college education and to understand their financial obligations," U.S. Secretary of Education Arne Duncan wrote in an open letter to college and university presidents. "It starts with transparency. Families should have clear and comparable information in a common format to guide their choice."
Tufts has yet to sign on to the "Shopping Sheet" program, according to Reilly.
"We're still looking at what the pros and cons are," she said. "The award that I have now shows how we calculate your need and then shows how we meet your need. The shopping sheet doesn't talk that way, so we're trying to figure out, 'Do we just use the shopping sheet and not our letter? Do we give them both?' I'm not sure."
Jem Wilner, a freshman, expressed optimism about the "Shopping Sheet."
"I don't know if it would've been used in my choice, but I can understand why it's an incredible idea," Wilner said. "It does play out every single part of what you need and how much money you're going to be needing to go to a school. Going into college, it could definitely affect your opinion on where you're going."
