Thanks to Uncle Sam, student loan interest rates hike, but increased financial aid will counteract some costs

For some students, the cost of college is increased again this summer.

But this time it… For some students, the cost of college is increased again this summer.

But this time it wasn’t the chancellor, the board of directors or even the University that was responsible. Blame the federal government.

On July 1, the interest rates for repayment of federal student loans rose to 5.3 percent for Stafford loans and 6.1 percent for Parent Loan for Undergraduate Student loans, the largest increase in the two programs’ history.

Suzanne McColloch, the senior associate of Pitt’s financial aid office, however, said that the increase would not dramatically affect most students’ finances.

“Honestly, it’s not going to cramp people’s lifestyles,” McColloch said.

She explained that the increase would amount to about $10 a month more when students begin to pay back their loans.

Prior to the increase, the Stafford and PLUS loans were at record-low interest rates. Parents of students can receive PLUS loans.

McColloch also said that a 6 percent interest rate is still relatively low, especially in comparison to interest rates for credit cards and mortgages.

“It’s not a panic kind of thing,” McColloch said.

She said that there would only be cause for concern if the interest rates continue to increase at the same rate annually.

Finaid.com, a Web site that specializes in college financial aid issues, advised students to consolidate their loans before July 1, to retain the previous interest rate.

If students had consolidated their loans and then asked the University to defer payments until graduation, the previous, lower interest rates would be locked in. However, students must have accumulated more than $7,500 in debt before they are able to apply for consolidation.

McColloch said this advice might have been more appropriate for graduate students or students attending more expensive universities, because they would have accumulated more debt and might have had more loans.

McColloch recommended that students contact the Pennsylvania Higher Education Assistance Agency for future questions about loan consolidation or interest rate increases. The PHEAA’s Web site is www.pheaa.org.