Well-publicized cuts passed by Congress Feb. 2 to federal financial aid programs won’t have much effect on students’ aid packages, Northwestern officials said.

But interest rates on loans will rise and become fixed for students starting July 1 under a separate law signed by President Bush four years ago, said Michael Mills, associate provost for university enrollment.

Aiming to decrease spending on health and education programs, Congress last week cut $39.5 billion from its budget. The government did this by reducing the amount of money it pays to banks, Mills said.

“Banks took a hit,” he said. “Students really didn’t.”

Students could actually benefit from the budget cuts, Mills said. Some of the money the government doesn’t give to banks will help fund two new grants added to the Pell program, which gives eligible students grants that don’t need to be repaid. If Pell students in their junior or senior year decide to major in areas the government considers crucial, they will receive $4,000 each year. These majors include math, engineering and foreign languages such as Arabic.

The interest rate changes might also help students.

The new interest rates, although higher, will be fixed, Mills said. Loan interest rates currently vary with the market and can rise to about eight percent. Now students will only have one rate to pay, regardless of market conditions, he said.

“If interest rates go wild, students are sort of insulated from that,” he said.

Interest rates will rise to 6.8 percent from 5.3 percent on Stafford loans and from 6.1 percent to about 8.5 percent on PLUS loans, Mills said.

The PLUS loan interest rate was only supposed to rise to 7.9 percent under the 2002 law. But legislation passed last week brought the rate to the 8.5-percent mark.

Only incoming freshmen and other students taking out loans after July will have to factor in the increases in interest rates when they repay their loans, Mills said. Between 40 and 45 percent of each freshman class receives Stafford loans, he said.

The maximum Stafford loan for freshmen is $2,625; that will rise to $3,500 in 2007, Mills said. Stafford loans for sophomores will increase by $1,000 in 2007. Students generally pay back these loans within 10 years of graduating and can use them to help cover expenses, such as tuition and books. PLUS Loans help parents pay for educational expenses and vary in amount.

The average student loan debt for graduating seniors was $18,000 in 2005, Mills said. Under the increased interest rate, seniors graduating with this debt in Stafford loans would have $1,629.46 more to pay in interest, according to an online loan payment calculator at FinAid.org.

Although Elysha Rom-Povolo might take out more Stafford loans during college, the SESP junior said changes in interest rates wouldn’t affect her much.

“Yes, you’re going to have to pay a little bit more for college, but they’re still good loans,” said Rom-Povolo, who receives a Stafford loan as part of her financial aid package and does work-study at the library circulation desk.

Weinberg freshman Izabel Gronski, who has one Stafford loan, said she plans to take out more loans, but thinks inflation could make the increases beneficial.

“I guess it could be a good thing in the long run,” she said.

The increases also won’t be a major burden because market forces would have eventually raised interest rates anyway, Mills added.

Weinberg senior Andy Melka, who does work-study at Pick-Staiger Concert Hall, said he was glad he did not take out any loans as part of his financial aid package.

“It’s just easier to pay now than getting loans and having to deal with interest rates,” he said.

Reach Lauren Pond at [email protected].