Changes to Federal Student Loans for Graduate Students, 2012-2013

Changes to Loans for Graduate Students in 2012-13

The federal government's Budget Control Act of 2011 impacts students pursuing graduate education throughout the United States. For those receiving a federal Stafford or GradPLUS Loan, the act:

  • Eliminates the interest subsidy for subsidized Stafford Loans effective for new loans received on or after July 1, 2012. Students may still borrow the same amount, but the Stafford Loan will now be completely unsubsidized. This means the federal government will no longer pay the interest on loans while a student is enrolled half-time or more, and during deferment and grace periods.
  • Eliminates the rebate for all Direct Loans (subsidized, unsubsidized, and GradPLUS) effective for new loans beginning July 1, 2012. Currently, a 1 percent fee applies on each Stafford Loan and a 4 percent fee on each Graduate PLUS Loan, but a portion of the fee is rebated at the time of disbursement (.05 percent on Stafford and 1.5 percent on PLUS). Students will now incur the full cost.

The law continues to authorize the Department of Education to offer interest rate reductions to Direct Loan borrowers who agree to automatic debit loan payments from a bank account. The current interest rate reduction is .25 percent.

Please note that the changes take effect on July 1, 2012, and do not impact loans made for the fall and spring of 2011-12.

These changes increase the cost of loans for many students. We encourage you to review your expenses and reduce any unnecessary borrowing from loans planned for 2011-12. Also, strongly consider making quarterly interest payments to further reduce overall loan-related expenditures.

If you have any questions, please contact Ms. LaNae Herrera, Director of Financial Aid, at financialaid@iwp.edu or 202-462-2101 x315.