In light of attempts by the federal government to keep interest rates down, graduate students must now grapple with rule changes affecting their graduate school loans.
The federal government will no longer be covering interest on graduate student loans, and will also remove the six month interest grace period included with these student loans. This government action retains changes made last summer, but took effect June 1 this year.
Angélica Salceda, external affairs vice president for the U. California-Berkeley Graduate Student Assembly, said that graduate students are no longer eligible to receive subsidized federal loans.
“Instead, graduate students can receive unsubsidized Stafford loans with an interest rate that accrues while they are still in school,” Salceda said.
These changes received little exposure in the past month, as lawmakers focused on preventing a sharp increase in the interest rates for undergraduate student loans. Congress passed a bill Friday that prevented the student loan interest rate from doubling.
The new restrictions were part of a compromise between Congressional Democrats and Republicans that prevented the interest rate for undergraduates from doubling.
Judy Heiman, a principal analyst for the California Legislative Analyst’s Office, said students can still apply for federal forgiveness plans, including one that forgives any remaining debt after the holder completes 10 years of public service.
“These new rules may influence some students’ decisions (to attend graduate school), but more often than not (they) won’t really be a determining factor,” Heiman said.
The rule changes also affect undergraduate students. Previously, students had a six month grace period after they graduated during which the federal government covered their interest payments. The new rules eliminate that grace period.
Students can still wait six months before making their first payment, but interest will begin accruing immediately after they graduate, and students will have to pay the interest without federal help.
Salceda stated that the rule changes will cause students to think twice before doing extra years of school.
“The elimination of the six month grace period will only pile up further debt on already cash-strapped students who are trying to find jobs during the struggling economy,” Salceda said. “Each month that passes, starting from day one after receiving a diploma, students will be thinking about all the interest that is accumulating.“
The new rules have left many graduate students worried about paying for their education.
“I have relied on subsidized loans to fund my studies,” said Sonja Diaz, a juris doctor candidate at the UC Berkeley School of Law, in an email. “Despite being eligible for federal subsidized loans for almost a decade of my UC education, I will no longer receive this type of financial support as I enter my last year of law school; at a time when I need it most.”