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Beware the New Rules and Regulations for Student loans.

Higher interests on Stafford loans, Interest and repayment Grace period, PLUS loans and Pay-As-You-Earn.

There are great concerns about the big debt most college students are finding themselves in because of higher college costs which are making students to borrow more and more money to be able to finish college.

Recently, laws are changing to discourage over borrowing by students who don't actually need the money and also streamline the system so it is more fair to those who actually need the student loans.

Some of the rule changes you need to consider include the following:

Interest Rates getting higher

Interest rates for the federal subsidized Stafford loans are going to double from 3.4% to 6.8%. This rate increase will affect new loans. So people who got their loans earlier will still pay the original 3.4% interest rate.

Still this interest rate increase will mean that you pay more monthly for your loan and hence you just need to borrow what you actually need for college.

Loan Interest Rates Start after Graduation

In the past, the Government covered the interest rates on student loans while they are in college and up to 6 months after they graduate. After that, the interest rate accumulating is paid for by the borrower.

New rules now means that while the Government will pay for interest rates when the student is still in college, the borrower will now start paying interest rate immediately after graduation. The 6 months the Government was paying for after graduation is no more.

However students are still given the same 6 months grace period before they are required to start making payments, although they are responsible for the interest accumulating in those 6 months.

No Subsidized Stafford Loans for Graduate Students.

Graduate students used to have access to Subsidized Stafford loans but new rules say that will no longer be the case. They can however get unsubsidized Stafford loans at a fixed interest rate of 6.8%. Interest rates for Stafford unsubsidized loans start accruing from the time they are given to the student.

However the graduate students have a grace period of 6 months after graduation before they are required to start payments.

PLUS Loans harder to get.

Graduate students can also borrow PLUS loans at an interest rate of 7.9%. These loans requires someone (usually parent) to underwrite for the loan and the standards for the underwriter have become more stringent.

The requirements an underwriter has to meet include having good credit, no bankruptcy and no unpaid bills in collection.

Pay-As-You-Earn Repayment plan

This is the only good thing in the new rules. It pegs your monthly payment to the amount of money you make. So if you make a lot, your monthly payment are higher than someone who earns less.


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