Some Student Loans Will Cost More Despite Deal

Despite the deal recently reached by Congress to contain the expense of higher education, college students are facing an approximately $20 billion increase in the cost of their federal student loans. Graduate students are now responsible for paying the interest on their federal student loans while they are in school and immediately after they graduate. Than means that they will pay an extra $18 billion out of pocket over the next decade.  Additionally, the government will no longer cover the interest on undergraduate loans during the six months after students graduate, which is expected to cost them more than $2 billion.

The above changes received little attention while lawmakers focused 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. The recent debate about the nation's increasing student debt mostly focused on how to prevent the interest rate on new federally subsidized undergraduate loans from doubling to 6.8% on July 1st. Senate leaders did reach a comprise on how to pay the estimated $6 billion cost of freezing the rate for a year.

However, the above deal has been blunted by two changes that will saddle students with higher costs. Lawmakers ended a long-standing program that pays the interest on federally subsidized loans for six months after a student graduates from college. That change applies to new loans issued through July of 2014. Students who take out these loans over the next year will still receive the lower interest rate but that amount will be charged to their bill as soon as they graduate. Students who apply for federal loans next year will also see a higher interest rate beginning upon graduation.

Additionally, the goverment will no longer pay the interest on new graduate loans while students are in school and for six months after they finish. This change comes as government data shows that the average annual cost of a master's degree and professional programs in law and medicine has jumped by double digits as enrollment in graduate programs has risen by 33% since 2000 to 2.8 million students.

The graduate loan subsidy is a result of last summer's debate over the national debt ceiling. Lawmakers eliminated the program to cover a shortfall in funding loans for low-income students.

Student loans generally cannot be discharged in bankruptcy. However, if you are struggling to keep up with your student loan payments as a result of other debts then you may want to consider filing bankruptcy. Filing bankruptcy may discharge unsecured debts such as credit cards and medical bills, making your student loan payments more manageable. I can help you file bankruptcy in Kansas or Missouri and I offer a free initial consultation. I look forward to your questions or comments.