With millions of students across the country climbing deeper into debt thanks to student loans, many now have one more thing to worry about. That piling debt will now start right after graduation, which means no more six month grace period on the interest for student loans.
It's all part of a federal plan to keep interest rates on loans low and be able to give aid to more students who need it. Starting July 1 all federally subsidized loans will start piling up interest as soon as you walk across the stage in your cap and gown and are no longer a student. Graduate students who used to be able to defer their loans by continuing their education won't be able to do that anymore. The interest kicks in on those loans right away too.
The plan will save billions for other federal student aid programs, but students who are in school right now are wondering at what cost?
"I'm definitely a little worried," WIU Sophomore Wendy Orman says. She like many others expected to have a freeze on her loans, giving enough time to get a job and pay them off, but not anymore.
"This was definitely a shock to me," she says, "I didn't know they were going to make any changes to that. Right now I'm a student worker, once I graduate, I won't have that position anymore and it might take me a couple months to start my career so I won't have any real source of income."
Before this month, a federal program had the government picking up the tab for the interest on student loans. Now that program is gone and students will see their debt pile up as soon as they step out of the classroom and into 'the real world'.
"That grace period gives you enough time to either figure out a job or what you're going to do, where you're going to live," WIU Graduate Student Karri Folks says, "Not having that grace period is just a little scary."
Financial directors KWQC spoke to say there will still be a six-month grace period before students are required to start paying off their loans, but the interest will still start piling up right away.
"You might as well start paying otherwise you're going to be paying interest and you're going to end up having to pay the student loans and interest is going to just keep accumulating," Orman says.
That goes for grad students too, causing some students to re-think their post grad plans.
"I was trying to get at least a masters, I wanted to go for a PhD, but now it seems like it's going to be pretty hard to get that," St. Ambrose University Junior Blake Beal says.
Financial directors at WIU tell TV6 they don't expect enrollment numbers for their grad programs to drop. but students working on their degrees say this, along with the uncertainty of today's job market, is narrowing their options for life after college.
"The loans right after you get out of school, that's going to be kind of hard to manage, plus jobs aren't out there," Beal says.
We're told by financial aid directors this will only affect loans taken out from now until at least July 2014. Any loans students already have will not be affected. No word yet on what will happen after that July 1, 2014 date.
