By Alexa Rush
University Daily Kansan, U. Kansas
(UWire)—Undergraduates don't worry, the federal debt limit bill passed doesn't affect you, but it does affect graduate and professional students.
The Budget Control Act of 2011, which would allow the debt ceiling to be raised up to $2.4 trillion in two stages, requires all graduate and professional students receiving federal loans to pay interest. However, this change won't go into effect until July 1, 2012.
Subsidized interest on Stafford Loans will be eliminated. Unsubsidized loans are still available, but students should be aware that interest will start to accumulate while they are busy hitting the books.
"About 35% of Lawrence/Edwards graduate and professional students receive need-based loans each year, with an average annual loan amount of about $7,700," U. Kansas spokeswoman Jill Jess said.
Under the previous system, interest did not accrue as long as the borrower was at least a half-time student. It also offered a six-month grace period immediately following graduation.
With this new bill in place, there will no longer be a grace period and students are expected to begin paying the interest that has gathered on their loans promptly after being handed their diploma, unless a student returns to school or enters the armed forces. The changes do not affect existing loans. Additionally, students will no longer be rewarded for making payments on time.
Brandon Gillette, vice president of the Graduate Association of Students in Philosophy at KU, has concerns about the new financial stress students will face.
"The graduate students who do not have another source of funding will either have to choose between unsubsidized or private loans, both of which have higher interest rates and thus higher cost," Gillette said.
Subsidized interest on Stafford Loans will be eliminated. The Congressional Budget Office states that by removing the subsidized loan program for graduate and professional students and eliminating certain loan repayment incentives, direct spending will be reduced by about $21.6 billion from 2012 to 2021. From this amount gathered, $17 billion will be put toward the funding of the Pell Grant program, which should prove to be good news for an estimated 4,175 Lawrence and Edwards students and 106 Medical Center undergraduates who receive federal Pell Grants each year.
"This act should not have a direct impact on the amount of financial aid awarded to students," Jess said. "Students may minimize federal student loan interest by borrowing responsibly - borrowing only what is needed for educational expenses."