Friday, Congress passed a transportation bill that included extending the 3.4% interest rate on Undergraduate Subsidized Loans for another school year. While this is only a one-year extension, it is better then nothing.
But the question was always how was this going to be paid for. One of the ways that it is being paid for is to limit the total number of years students can have their loans subsidized to six-years after they start their undergraduate program. The rule only effects new student loan borrowers after July 1, 2013.
Starting July 1st, 2013, new borrowers will be limited in the amount of time they can receive an in-school interest subsidy. Students will lose eligibility for that subsidy once they have reached 150% of the published length of their education program.
With this latest caveat, there is a growing list of “it’s complicated” about financial aid rules that need to be disclosed and explained to students and their families. These caveats include the six-year lifetime limit on Federal Pell Grant that was enacted retroactively upon students already pursuing their education, the elimation of the ability to benefit testing to qualify for federal financial aid for students without a high school diploma or GED (that grandfathered in previous enrolled students) and the elimination of subsidized loans for graduate students (including those already enrolled in their programs). Year-round Pell Grant was around for a whole school year before it was elimiated. Academic Competiveness Grant and SMART Grant programs were around for a couple of years before not being funded.
Does this constant change increase the work load for financial aid adminstrators? Yes, but that is not really that important. Financial aid administrators have and will continue to implement the programs and get the job done. It is what financial aid administrators do and get paid to do. By and large, they do a pretty good job at this.
While these fly-by-night programs and abrupt course changes are issues for financial aid adminstrators, the real problem is for the students who are navigating through their education. Students make plans and our hope is that they are making plans based on their program time horizon of two, four or even five years (let alone graduate school beyond). We now have students who have three or four different loan servicers, have lost aid one year, gain some other aid the next year, made plans based on current information only to have to radically change plans due to unpredictable decisions of Congress. If we ask students to commit to an educational goal, should we not also have to make the same promise to students?
We are at a time for a complete overhaul of the financial aid system and the way that student’s educations are funded in this country. It is time to stop the bandaid approach to policy and programs.
- House and Senate Pass Student Loan Interest Rate Extension via Association of Community College Trustees ↩