With the elimination of the subsidized-loan option, graduate students who take out large amounts of loans could owe hundreds of dollars more per month. For example, a graduate student who has borrowed $65,000 in subsidized loans from the federal government—the maximum amount now allowed—would have to take out an unsubsidized loan, requiring $207 more in payments per month in interest over the course of 10 years, including while still enrolled in school.
Graduate students also will no longer be eligible for special incentives for repaying their loans on time. Students now pay a 1-percent origination fee when they take out a loan but are given a refund equal to half that amount when they make 12 successive on-time payments in the first year after graduation. The Congressional Budget Office estimates that eliminating this credit would save the federal government $3.6-billion over the next 10 years.
Graduate students are worried about what this will mean for their wallets and for their ability to finish their degrees. And some of their advocates say that enrollment and retention rates may drop. These policy changes may also have a significant negative impact on students from disadvantaged and underrepresented backgrounds (i.e., women and racial minorities), who already carry higher debt levels than the national average. Lastly, eliminating the in-school interest subsidy will also increase the cost of attendance at a time when the job market is sluggish and advanced degrees offer little shield from unemployment and underemployment. It is disappointing and worrisome.
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