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Student loan interest rates may double in July
On July 1, Congress will vote on whether to keep the current 3.4 percent student loan interest rate or double it to 6.8 percent. This rate hike will affect the subsidized Stafford Loan, which is the most common form of federal aid for students, according to College Board.
The increase in interest rates could cost up to $1,000 more per student, per year. For students who take out a significant amount in loans each year, the increase could cost even more. If Congress does not veto the raised interest rate, more than 7 million students could be struggling to afford their education.
“Many financial aid programs have been cut and even eliminated over the years. However, this is getting more attention because it affects every college student, not just a certain group,” Senior Director of Financial Aid Dominic Yoia said.
Over the past few weeks, President Barack Obama visited colleges and universities across the country advising students to contact their local representatives and protest the increase. So far he has visited the University of North Carolina at Chapel Hill, University of Colorado and University of Iowa. However, the option for a delay in the increase would only be a temporary solution.
“The delay would only be a one-year fix,” Yoia said. “The rates were actually at 6.8 percent about five years ago, and were gradually lowered to 3.4 percent. The problem is that the government is subsidizing the loans, and they eventually will have to go back up even if the increase is postponed in July.”
Hamden native and student at UNC Chapel Hill Zakiya Harris attended Obama’s speech about the topic this past week at her school.
“Obama talked about the middle class dream, and how we all have the right to be able to own a house and raise families in the future,” Harris said. “We shouldn’t have to worry about paying off college loans years and years from now. He told us that he only finished paying off his own student loans eight years ago, which was surprising to all of us.”
The rate hike comes at a time when college costs are higher than ever, and the number of students who receive federal or private aid is continually rising. According to College Board’s 2010-2011 student aid analysis, $177.6 billion was taken out in loans to pay for college, with federal loans accounting for 39 percent of that.
The same study revealed that 56 percent of students who graduated from a public four-year university in 2010 graduated with debt; the average amount was $22,000. For private schools, the debt averaged at $18,300.
“I wouldn’t really have been able to come to Quinnipiac without taking out loans,” freshman Ally Carter said. “The out-of-state tuition for any school is really expensive. I don’t really know how the interest rate increase will affect me in the future. I’m nervous about having a ridiculous amount of debt, but I guess I’ll have to wait to find out until after I graduate.”
The possible increase brings about the question of whether or not the new law would affect students’ decisions to take out loans in the future, or even their choice of colleges. While it is still unclear on how this could potentially affect Quinnipiac students, any increase may prove to be a potential debt in the future.
“I don’t think that the increase would make or break a student’s decision to come to Quinnipiac,” Yoia said. “It just means that they will be paying back more money afterwards, which is the reality of most colleges today.”