College students won a small victory this week when Congress, facing a July 1st deadline, extended low interest rates on undergraduate Subsidized Direct Loans for a year.
The Subsidized Direct Loan is a federal loan program for needy college students. The loan is interest-free while the student is enrolled in school, and begins accruing interest at a fixed interest rate after the student graduates or drops below half-time attendance. The interest rate, fixed at 6.8% in 2006, was gradually lowered for loans borrowed since 2008 to the 3.4% rate, in effect for the 2011-2012 academic year. This reduced rate was set to expire on July 1st, which would have doubled the interest rate for future borrowers.