NEW YORK—Starting June 30, the interest rate on new Federal student loans will drop from the current fixed rate of 6.8% to 6%. The change is a result of a bill that the Democratic Congress introduced in June 2007.
The new legislation will provide more than $20 million in Federal student aid over the next five years. By 2011 college interest rates will be reduced to 3.4%, half of the current rate.
By itself, the eight-percent drop effective June 30 will save the average New York student enrolled at a four-year university $2,660 over the life of the loan.
The new interest rates will benefit students, especially incoming freshmen, who will save $27,000 per loan, assuming that he or she is attending a four-year school and taking ten years to repay the loan, according to Majorie Mattis, a student financial services counselor at Mercy's Bronx campus.
The College Cost Reduction and Access Act, enacted in September last year, provides the largest expansion in college aid since the G.I. Bill of 1944. Since 2001, tuition and fees in the nation's private universities have increased 23% while those at public universities have increased 47%, adjusted for inflation.
New York Congressman Joseph Crowley (D-Bronx, Queens), stressed the importance of the new rates to his constituents. "The ever-rising costs of education is really impacting the availability of education for the working poor and working class people of my district," Crowley said. "It was necessary; it had to be done in order to make it (college) accessible."
He met with students and faculty yesterday at Mercy College's Bronx campus for a forum on college costs.
For a school like Mercy College, the new rates will be a great boon to the student body. Mercy College is a Title III college, meaning that their students are able to contribute much less toward college than students in other areas. "Most of our students are first generation (college students), and there is a lot of need for our students," said Dr. Kim Cline, the college's new president. "When they get out they'll have jobs; we know that, but now they'll be able to buy cars and houses."
"It's comforting to know that the rates are decreasing and the grants are increasing," said Nicole Morales, honor student and vice president of student council at Mercy College. "It leaves more room to work with whereas before you felt you were constricted."
The bill also includes other provisions for the 2008-2009 school year, including an increase of the Pell Grant scholarship by $490, raising the maximum award to $4,731. To encourage students to teach high-need subjects such as math and science at low-income public schools, the government will give $4,000 up-front for the student's tuition. Additionally, it will grant loan forgiveness after 10 years to public servants such as firefighters, nurses, and military services members.
To learn more about the new rates and other details, see the Federal Student Aid web site at studentaid.ed.gov.
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