The NewStandard ceased publishing on April 27, 2007.

College Loan Rates to Rise as Aid Drops

by Brendan Coyne

*A correction was appended to this news brief after initial publication.

June 1, 2005 – With less money expected to be awarded to families receiving federal financial aid grants next year, the Department of Education yesterday announced that interest rates for college loans will jump by as much as 70 percent one month from today.

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In late May, the Government Accountability Office restated its projection of Pell Grant awards to low-income students and other financial aid disbursements in response to a request by Wisconsin Representative David Obey.

The new report projects that 81,000 students who formerly qualified for the grant would fail to do so for the next school year and another one to two million low-income applicants would receive a reduced amount of aid from the federal government. The GAO expects Stafford and PLUS Loan recipients to receive smaller awards as well.

The change is due to the restructuring of state tax tables. According to the report, families or individuals with incomes over $25,000 are likely to see their aid cut.

Meanwhile, the Stafford Loan interest rate will rise from 2.77 percent to 4.7 percent while a student is in school or the repayment is under deferment -- a 70 percent change -- and from 3.37 percent to 5 percent while being repaid -- a 57 percent increase over current rates. PLUS loan awardees will have to repay their loans at a 6.1 percent markup, jumping from the current rate of 4.17 percent.


Minor Change:

In the original version of this brief, it was improperly reported that the Stafford Loan interest rate will rise from 2.77 percent to 4 percent. In fact, the rate is expected to rise to 4.7 percent.

 | Change Posted June 28, 2006 at 19:52 PM EST


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The NewStandard ceased publishing on April 27, 2007.

Brendan Coyne is a contributing journalist.

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