For the average student, federal and commercial loans have been a necessity to pay their way through college. Until 2010, the average student would pay around 15 percent of their income back to the government for the loans. These need-based loans are to assist students in paying for their education while giving them a feasible interest rate and a manageable payment plan. With new legislation, signed into law by President Barack Obama, the cap at 15 percent will be lowered to 10 percent by 2014.
Seeing a need for students to be able to make payments in a feasible manner, President Obama sped up this legislation to start in late 2012, rather than wait an additional two years to begin the new regulations. For many students, this lifts some of the pressure they have for themselves on paying back their federal student loans.
Another enactment to the improvements deals with the Federal Application for Student Aid website. According to the White House press release on June Sixth, the new application process, “Will create a streamlined online application process for Income Based Repayment (IBR), that allows student loan borrowers with federally held loans to import their IRS tax return income data directly into the IBR application.”
In prior years, a student wishing to apply for Federal Application for Student Aid would have to “fill in the blanks” when listing their income earned for the year, as well as their parent’s income. For the student, this means they will no longer have to guess, and potentially make an error on their application, but rather upload the actual government paperwork showing the income of their parents and themselves.
Any sort of debt help for students with loans is a major turning point from times of before. According to the National Student Loan Data System, students were looking at an interest rate of 6.8 percent starting in 2006 on their federal loans. However, since then they have seen a steady decline in the interest rate. Beginning in July 2011 and ending in June 2012 the rate declined to 3.4 percent. It should be noted though, that graduate and professional students will still see a steady 6.8% interest rate on unsubsidized loans.
UW students eligible for FAFSA, just as any other college student receiving federal aid, will benefit from this legislation.
According to the Office of Student Financial Aid, only 42 percent of students at UW are receiving some form of financial aid, compared to the 65.6 percent nationally receiving any form of aid. Though the average UW student is in less debt than the national average, this still helps.
For the Director of the Office of Student Financial Aid, Joanna Carter, this is a step in the right direction.
“I am always pleased to see students get a break on the cost of financing their education,” Carter said.
With this new legislation being enacted, students should be able to look ahead to their future after college as more comfortable and relaxed as they pay off their education.
