Grad students: Say “bye, bye” to subsidized Stafford loans! While Congress was busy in early August figuring out if they’d pay back the money they already spent, they managed to stick a provision in the debt ceiling bill that kills the subsidies on Stafford loans for all graduate students. The Chronicle of Higher Education elaborates:
Interest will now accrue on all federal loans to graduate students instead of on two-thirds of those loans. The availability of loans won’t be affected. The issue is that when borrowers leave school, unless they have paid interest while in school, students will owe more than they otherwise would have. A student who borrowed the 2009-10 averaged subsidized amount of $7,171 at the beginning of each of two years of graduate school would owe about $15,838 instead of $14,342 based on 6.8% compounding interest. She would face monthly payments of $182 instead of $165 over a 10-year standard repayment period.
So, let’s do the math. Over ten years, students will pay $2,040 more in interest. And that’s just for two-year graduate programs. What about law students and med students?
Students who are in school for longer periods of time–including most medical and law students–will lose a bigger benefit. For those in shorter graduate programs, the subsidy matters less.
The government just raised every graduate student’s tuition a few thousand more dollars (in addition to the thousands that the schools will raise it next year). Of course, for law students and med students, $2,000 is a drop in the bucket compared to the overall cost of attendance.
*The figures in CHE’s story are inaccurate. For the 2009-10 academic year, graduate students took out $25.3 billion, not million, in Stafford loans.
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