Budget Control Act Changes
It is important to remember that these changes go into effect for new loans that are originated on or after July 1, 2012. As the Budget Control Act was passed without the benefit of public hearings, student aid advocacy groups are currently studying the exact wording contained in the legislation. This is an evolving situation so we want to encourage the Loyola community to actively follow the ongoing debate in Congress about the value of funding federal financial aid programs for students.
" Subsidized interest means the government pays the interest while the student is in an in-school or other authorized deferment period. It does not affect the interest rates for graduate and professional students. But if the borrower defers repaying the loans while in school, the accrued but unpaid interest will be capitalized, increasing the loan balance at repayment by about 16%. Since about one-third of student loan debt owed by graduate and professional students is subsidized, this change will increase the average debt at the start of repayment by about 6% overall (typically between $2,000 and $4,000), plus thousands of dollars of additional interest over the life of the loan."
How These Changes May Impact the Total You Will Owe
Our colleagues at several medical schools have developed some preliminary models to illustate how these changes will potentially impact students.
Ellen Spriker from Columbia University School of Medicine financial aid prepared a spreadsheet which shows the additional cost of losing the in school subsidy and the repayment differences over 10 and 25 years. It lists the additional cost just after four years of graduate education as well. Keep in mind the additional cost for one student when multiplied by hundreds if not thousands of students over time will have an effect on the debt ratios at our schools and the contributions the overall debt burden across the country.
- EXAMPLE: Increased Interest to a Graduate Med Student if the subsidized Stafford Loan Program is eliminated (4 years full-time)
Updated August 4, 2011