Congressman Faleomavaega today announced that with the passage of H.R. 4348, the Surface Transportation Extension Act of 2012, the U.S. Congress successfully agreed upon a stopgap measure to prevent an increase in student loan interest rates. Congress passed the bill last Friday, effectively preventing a scheduled increase on July 1, 2012 that would have doubled the interest rates on Subsidized Stafford Loans from 3.4 to 6.8 percent. The President is expected to sign the bill into law soon.
Established through the William D. Ford Federal Direct Loan (Direct Loan) Program, Subsidized Stafford Loans are low-interest loans for students who demonstrate financial need to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. To determine eligibility, participating colleges will review the student’s results of the Free Application for Federal Student Aid (FAFSA) to decide the students’ loan limit.
Nationwide, more than 7 million low- and middle-income students use the subsidized loan distributed by the U.S. Department of Education to help pay for college. The interest rate freeze is expected to save each student an average of $1,000 in extra financing fees.
Congress initially lowered the interest rates on Subsidized Stafford loans from 6.8 percent to 3.4 percent for undergraduates beginning academic year 2008-2009 through the College Cost Reduction and Access Act of 2007. The lower rate, however, was set to expire on July 1, 2012.
To pay for the measure, leaders in the U.S. Senate agreed that the program will be financed by raising premiums for federal pension insurance. Congress also expects to save $1.2 billion with a change in the program’s eligibility by capping the loan term length at 150 percent of the length of a student’s college program. For example, students enrolled in a four-year bachelor’s program will be able to receive loans for only six years and students in a two-year associate’s program will be able to receive loans for only three years.
“I am pleased to share with our students and families in American Samoa that with the passage of this bill, eligible students in our Territory will be able to save thousands of dollars in financing their college education,” Faleomavaega stated.
“I thank my colleagues in the U.S. Congress for their diligent efforts in making sure that students across the nation can maintain favorable interest rates that will enable them to get a head start on their post-college careers and pay down debt.”
“I encourage all college-bound students to take the necessary steps to complete the Free Application for Federal Student Aid (FAFSA) so that they may be considered for this program. It is important to note however that all students should make every effort to seek out grants and scholarships that do not need to be paid back upon graduation,” Faleomavaega added.
“As a law school graduate who worked his way through school, I am a strong advocate for programs that increase access to higher education for low- and middle-income families and students. I am thankful that with the recent passage of the Surface Transportation Extension Act of 2012, which has provided much in terms of transportation benefits to our Territory, our young people will also receive an added benefit to help them in their educational pursuits,” the Congressman concluded.