Winners and losers of student loan legislation

"Free Application for Federal Student Aid"

"Free Application for Federal Student Aid"

While  politicians on both sides have hailed the student loan program passed by Congress on July 31 as a victory for students, others have been quick to emphasize the consequences of the measure. As current students benefit from the lowered interest rates, national economic improvement will prove fatal to keeping rates down in the future.

The breakdown:

The Bipartisan Student Loan Certainty Act of 2013 is a response to the concerns over the impending increase in interest rates on student loans. In order to keep rates down in the short term, the legislation ties interest rates to the 10-year Treasury notes and fixes interest rates for each loan.

This year, the interest rates of undergraduate loans would be lowered to 3.68% with graduate loans falling from 6.8 percent to 5.4 percent and PLUS loans eased from 7.9 percent to 6.4 percent. Subsidized Stafford loans, however, doubled from 3.4 to 6.8 percent.

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Photo courtesy of Tulane Public Relations/Wikimedia Commons.

Photo courtesy of Tulane Public Relations/Wikimedia Commons.

Who wins: Present borrowers.

Although the majority of loan holders benefit from the legislation, the break in interest rates is likely temporary, leaving those with one or two years left to borrow in an optimal position.

Additionally, while student loans previously faced varying interest rates throughout their lifetime, the bill nails down a constant interest rate, making repayment more predictable.

Who loses: Future borrowers.

The main criticism levied against the bill is that, given the expected economic improvement in the next couple years, the interest rates will raise quickly and drastically from the current rate. Additionally, the law fails to address a host of deeper issues within the student loan system. Without raising the borrowing limits, students and their families continue to burden the yearly costs of tuition inflation.

Comparison of post-graduation tuition values from 2008 demonstrate that US universities are the most expensive in the world. Image courtesy of mastersportal.eu/Wikimedia Commons.

 US universities are already the most expensive in the world.
Image courtesy of mastersportal.eu/Wikimedia Commons.

Here at Boston College we have already begun to feel the effects of this tuition inflation. For the 2013-2014 academic year the price of university tuition, room, and board rose 3.6 percent in comparison to the 2012-2013 academic year. While student loan legislation may seem like a temporary mode of relief from these significant financial burdens, the long-term price of higher education in the United States is steadily increasing and falling on the shoulders of students and families, despite lawmakers' efforts. 

Screenshots by Geena De Rose/Gavel Media.

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