Students may face higher costs for federal loans

College-bound kids and their parents need to plan ahead in view of the potential for doubling rates on the popular Stafford lending program.


Interest charges on new subsidized Stafford loans are scheduled to go July 1 from a fixed 3.4 percent to 6.8 percent. Stafford loans, which don't require repayment until six months after leaving school, account for more than a third of federal student aid.

By one estimate from the U.S. Public Interest Research Group, a consumer advocacy organization, a doubling of interest rates could add about $1,000 more on the cost of the loan per year per borrower.

A rate increase would hit only students taking out new subsidized Stafford loans from midyear on. Students with existing subsidized Stafford loans would not to see a rate increase - unless they take out a new loan after June 30 for the next school year.

If this sounds familiar it's because the same warning over a possible doubling of rates came last year until Congress - in the midst of an election year - granted a one-year reprieve on the rate increase.

I wouldn't count on anything more than another short-term, midsummer fix coming out of Congress.

Given that college admissions letters and financial aid packages are starting to land, there's not much that families in the graduating class of 2013 can do but watch the political drama unfold.

But for families still a year or two away from college bills, I'd suggest concentrating even more on ways to minimize potentially crushing debt.

Pay more attention to the cost of college early on in the selection process. Most schools now post net price calculators on their websites that give you data on the true cost of attending. I also recommend checking out the Department of Education's College Scorecard, which provides information from the family's perspective on borrowing costs, average student debt and loan default rates of potential schools on your students' list.

Like buying a house, a new car or a 60-inch big-screen, don't overextend your budget when it comes to college. That might mean saying "no" to the No. 1 choice that is also a financial reach.

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