Talk about getting kicked while you’re down. In this clip from from State of the Union on CNN, Office of Management and Budget Director Jacob Lew talks about ending subsidized Stafford loans to graduate students:
This conversation is misleading. Graduate students are already paying interest on certain loans–unsubsidized Stafford loans, GradPLUS loans, and private loans. If you go to law school or business school or pursue any professional degree, your graduate school education isn’t going to come free–and it’s not going to come cheap.
Lew appears to be talking about subsidized Stafford loans. Right now, graduate students can receive up to $8,500 per year in subsidized Stafford loans. The interest rate on these loans is fixed at 6.8%. (The same loan for an undergraduate student accrues interest at 4.5%.) One year’s worth of interest would amount to $578 on top of that $8,500 loan!
Carry that loan for three years–as one would going to law school–and it’s now up to $1,855 in interest. That amount of interest is more than 20% of the principal. When the loan goes into repayment, repayment starts from a principal balance of $10,355.
Bottom line: if this passes, graduate students will be getting screwed even more than they are now.
Last year, President Obama asked for loan forgiveness [YouTube] after 20 years of income-based repayment (or 10 years of income-based repayment for borrowers in public service):
And let’s tell another one million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, […]
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