Winners and losers in recent college student loan legislation

by Grace

Recent legislation saves $7 billion for some college students but creates $20 billion in extra costs for others.

Last-minute legislation to keep the subsidized Stafford student loan interest rate at 3.4% for at least one more year is estimated to save students approximately $7 billion, but the cost of other less publicized changes will cost them “roughly $20 billion”.

College students are facing a roughly $20 billion increase in the cost of their federal loans, despite a much-heralded deal in Washington to contain the expense of higher education.

Starting Sunday, students hoping to earn the graduate degrees that have become mandatory for many white-collar jobs will become responsible for paying the interest on their federal loans while they are in school and immediately after they graduate. That means they’ll have to pay an extra $18 billion out of pocket over the next decade.

Meanwhile, the government will no longer cover the interest on undergraduate loans during the six months after students finish school. That’s expected to cost them more than $2 billion.

These changes have received little attention as lawmakers instead focus on preventing a spike in interest rates on federal student loans. They are the fallout of earlier political battles and compromises over broader issues such as the federal budget and the national debt ceiling….

Another recent change cut the Pell Grant maximum eligibility period from eight to six years.

Related:  A roundup of pending federal college financial aid changes

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