The Online Reflector

In late June, the United States Congress voted to pass a one-year extension of the current subsidized Stafford Loan interest rate of 3.4 percent. However, Congress also placed a  six-year limit on students’ ability to take out subsidized student loans.
The Stafford Loan subsidized interest rate was lowered from 6.8 percent in 2007 when Congress enacted a gradual rate reduction in response to the slumping economy. The rate dropped to 3.4 percent but had been set to rise back to 6.8 percent last July, according to Director of Financial Aid Linda Handy.
“The government [probably] felt like doubling the rate would be adding insult to injury. So there was a big push to legislate a one year reprieve,” Handy said.
The rate extension gives student borrowers a break in light of the high unemployment rate among young workers.
“It’s hard to say x-dollars is the effect, but it is for sure that without it [the extension], everyone would have paid more,” Handy said.
According to money.cnn.com, the $6 billion required to pay for the rate extension will come from changing the way that companies fund pensions.
The rate extension took effect in July, but the accompanying six-year limit on borrowing will take effect exclusively for new borrowers starting with the 2013-2014 academic year, according to Assistant  Director of Financial Aid Sandra Osborne.
The six-year limit on subsidized loans could be a problem for some students starting in the 2013-2014 academic year. UIndy currently has a borrowing limit of 186 credit hours, and the U.S. government currently has a limit of $23,000 of subsidized borrowing for four years.
“That’s the downside to this, [Congress] is limiting student borrowing to no more than 150 percent of the student’s program [roughly  6 years],” Osborne said.
Osborne said, however, that most UIndy students should not have to worry about the limit.
“Most [UIndy] undergraduate students do graduate in four or five years, so they should have enough [aid], especially if they are careful,” Osborne said.
Osborne added that paying on unsubsidized loans that are accruing interest while the student is in school is a good idea. Handy stressed that students should not borrow more than is necessary.
“Students should be aware of what their expenses actually are and not borrow more than they really need to,” Handy said. “It may not seem like a lot now, but over a long period of time those balances add up.”