Sequestration to increase Direct Loan Origination Fees
As a result of Sequestration going into effect, loan origination fees on the Federal Direct Student and Parent Loan programs will see a slight increase to its origination fees, beginning with loans disbursed on or after July 1, 2013. Origination fees are deducted from the loan prior to disbursement. The Direct loan origination fee will increase from 1.0% to 1.051%, and on PLUS Loans, from 4% to 4.204%. On a $3500 freshman loan, the increase means the disbursed amount, after fees, will be $3463.25 instead of the current amount of $3465.00. On a $4,000 PLUS Loan, the disbursed amount will decrease from $3,840 to $3831.84.
Subsidized Direct Loan Interest rate to increase to 6.8% for 2013-14
The extension of the 3.4% interest rate on the Federal Direct Subsidized Loan program is set to expire after the 2012-13 academic year. Unless further action is taken by Congress, the interest rate will automatically return to 6.8% for subsidized loans borrowed after July 1, 2013. The agreement that made this interest rate extension possible also permanently limits a student's eligibility for subsidized loans to 150% of the length of the student's academic program. This means students in four year degree programs like PLU will be eligible for subsidized loans for the equivalent of six years. Students who reach this limit could continue to receive unsubsidized loans only, if otherwise eligible. The 150% limitation will affect new borrowers who borrow the subsidized loan beginning on or after July 1, 2012.