department of education student loan

Interest rates on student loans increase

An interest rake hike July 1 may leave thousands of students paying off higher debts from their student loans after completing their education. Interest has gone up on Stafford loans, from 4.75 percent to 6.54 percent for both current students and graduate students in their grace period. For graduates currently repaying their loans, the rate has gone from 5.3 percent to 7.14 percent. In other words, a recent graduate paying off a $30,000 loan started paying $194 per month, but will now be paying $340 per month. Interest rates may change every July 1, but they are not supposed to rise higher than 8.25 percent, according to the U.S. Department of Education Federal Student Aide Guide for 2005-2006. Undergraduate dependent students cannot have a debt more than $23,000 in Stafford loans after graduating, and independent undergraduates cannot go over $46,000 in debt.

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Panel blasts aid system

With the July 1 deadline for student-loan consolidation looming over already-thin wallets, many are wondering what is being done to alleviate the problems of complicated application forms and paltry aid checks.

In an effort to remedy the problem, a Department of Education committee lambasted the country's financial-aid system in a recently released report. At the Commission on the Future of Higher Education's closed-door meeting Wednesday, members addressed proposed changes to higher-education affordability, access, accountability, quality, and innovation.

"The commission is committed to ensuring that America's colleges and universities are productive, efficient, and affordable," the report states. "But to our dismay, we have found that our nation's system of higher-education finance is increasingly dysfunctional, inefficient, and inadequate."

The report called for an overhaul of student financial-aid and recommended a "significant increase" of need-based financial-aid, a simplification of the Free Application for Federal Student Aid, and a consolidation of the 17 federal financial-aid programs.

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