Students scrambled last week to consolidate loans and lock in favorable interest rates for federal Stafford and PLUS loans before the rates became fixed on July 1 at nearly two percentage points above those that have been available to students in recent years. The U.S. inflation rate hovers around four percent per year.
The two types of federal loans, which will now carry 6.8 percent and 8.5 percent fixed rates respectively, have become even more affordable than usual during the past two years, bottoming out at 2.77 percent in the 2004-2005 academic year.
Over half of the members of the Class of 2009 received some sort of financial aid to pay for their Dartmouth education, and 43 percent of students who were enrolled for the most recent academic year got aid packages that included Dartmouth scholarships. The numbers confirm the experience of most students: affording a Dartmouth education is often no easy feat.
The College's financial aid office vows to meet 100 percent of domestic student need, which often includes Stafford loans as part of a financial aid package, according to Director of Financial Aid Virginia Hazen.
Many students nationwide opted to consolidate their loans, but Hazen said her office did not counsel all students to take this route because it often means that students lose their post-graduation grace period and must begin repaying their loans sooner.
"It's a weighted average, so it depends on what the student has for rates," Hazen said. "In many cases it's not a good idea."
Tara Payne, vice president of marketing and communications at the New Hampshire Higher Education Assistance Foundation, said that her organization is not completely pleased with the new fixed rate, but it will remove the need for students to consolidate their loans annually while in college.
"On the one hand, it's a good thing for kids, because they don't have to worry about having four different loans with four different rates," Payne said. "That's one complication taken out of the picture."
Payne also stressed that while the rates may seem high to current students, they are low for the market in general.
The rates are adjusted annually on July 1 in accordance with Federal Reserve policy.
"They're up from last year, no doubt about it," she said, "but students who are entering their senior year have seen the lowest rates in the history of the loan program. That's why we would have encouraged students to consolidate while they are in school."
According to a report from the Institute for America's Future, the changes will cost the average student borrowing in New Hampshire $2,523.
Lindsay Weinstein '08, who said he receives financial aid from the College, expressed frustration at Dartmouth's constantly rising tuition, which he said is not always mirrored in financial aid adjustments.
"I keep losing more and more money," he said.
Payne anticipates that the number of undergraduate students taking out Stafford and PLUS loans will remain fairly consistent and might even rise due to the continually increasing costs associated with higher education.
"Stafford loan borrowing is almost routine for a lot of students," Payne said.
"I think that there's an expectation on the part of parents that kids participate in paying for the cost of college."
The maximum amount of money an undergraduate student can borrow on a Stafford loan is $2,625 in the first year, and increases to $8,500 per year for graduate study.
Hazen said that, overall, most financial aid recipients know they will have to deal with fluctuating rates.
"We did not get a lot of calls," she said. "They know there's nothing we can do to change the rate."
