Undergraduates who borrow federally subsidized student loans received a one-year reprieve from an upcoming interest rate hike, thanks to last-minute action by Congress. The increase, from 3.4% to 6.8%, was scheduled to take effect for loans issued on or after July 1, 2012, but the interest rate will now remain at 3.4% for the 2012-2013 school year. The delay was included in the recently-passed federal transportation bill.
Delaying the rate hike will cost the federal government $6 billion, and the cost will be funded in part by tightening eligibility for the subsidized loans. The legislation limits eligibility for the subsidy to 150% of a program’s standard completion time (e.g., a student in a four-year program will be limited to six years of subsidized loans).
