If you’re a student or former student with educational debt, or if you’re just someone made anxious by this country’s $1-trillion-and-growing student-debt bubble, you may well have breathed a sigh of relief this week when Congress reached an 11th-hour agreement to avoid doubling the interest rate on federal loans.
Phew! Students still only have to pay 34 times the interest rate of banks borrowing from the government! The educational gravy train rolls on!
But lost in legislators’ self-congratulation over not jacking loan rates in the middle of an enduringly shitty economy was some less good news.
Starting this Sunday, changes to federal loan policy will kick in that will make life with educational debt significantly more unpleasant. The changes are built into legislation dating back to last year, and unrelated to this week’s last minute loan deal.
The first change is that that six-month window you used to have after graduation before your Stafford loans started accumulating interest is gone. You’ll still have a six-month window before you need to start making payments, but any Stafford loans you take out after Sunday will start accumulating interest before you’ve returned your rental robes.
If you’re a graduate student, there’s another dispiriting development. It used to be that your interest on your existing federal loans wouldn’t grow while you were enrolled in graduate school. No more! As of Sunday, federal loans will grow even while you’re still in school.
And as for federal student loan rates holding steady at 3.4 percent? That deal lasts a year. Look out for another doomsday deadline when the extension expires in 12 months.