Bankruptcy Law, Credit, Timothy Kingcade Posts

Who the New Student Loan Act Really Benefits

You may be surprised to hear who the Bipartisan Student Loan Certainty Act of 2013, officially signed on August 9, by President Obama is actually benefitting. According to a recent story in U.S. News & World Report, the Congressional Budget Office projects the new law will increase government profits on student loans through 2023 by $715 million! The new law offers a moderate amount of help to current students at the expense of future ones and simply does not address the fundamental problem in the student loan system- the enormous profit the federal government is making at the expense of students.

The amount added to subsidized and unsubsidized direct loans for undergraduates is 2.05 percentage points. Unsubsidized direct loans for graduate and professional students have 3.6 percentage points added to the 10-year Treasury note rate and 4.6 percentage points are added to PLUS loans for graduate and professional students. By itself- when interest rates are low- this is not too bad.

Unfortunately, the new law combines this market rate with different – and much higher – interest rate caps. Undergraduates can now pay a maximum interest rate of 8.25 percent – compared with the previous maximums of 6.8 and 3.4 percent for unsubsidized and subsidized direct loans. When interest rates go up, which they likely will in the near future, students will pay much higher rates.

Click here to read more on the new student loan act and who it is actually benefiting.

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