Endangered Species: Stafford Loan Low Interest Rates Set to Double This Summer [VIDEO]
While students dial down from their studies and prepare for a summer infused with fulltime work, internships, and much needed vacation time, the interest rates on their Stafford loans will have dialed up—way up, from 3.8 percent to 6.8 percent.
At least, they will if Congress doesn’t act to prevent the rate increase this July.
A coalition of college students, student loan debt activists, and youth advocacy groups like the U.S. Public Interest Research Group, Rebuild the Dream, and Campus Progress converged on Capitol Hill on Tuesday to deliver more than 130,000 signatures asking Congress to halt the interest rate hike on subsidized Stafford loans.
“Rising college costs, tight family finances, and uncertain job prospects pack a triple whammy for student borrowers,” said higher education advocate Rich Williams of U.S. PIRG. “In this economy, the last thing we should do is double the interest rates on student loans.”
The higher rate, according to the group’s analysis, will affect the 8 million lower- and middle-class college students who take out Stafford loans each year, tacking on thousands more dollars in repayment to an already depressing debt load.
Student loan debt—which has already surpassed credit card debt and is nearing $1 trillion—is becoming a more serious problem. Data released by the Department of Education last year revealed that more graduates were defaulting on their loans than in the past decade, an increase of almost 2 percent in the year prior.
Students who spoke with Campus Progress during the event said that the looming interest rate hike only adds to their swelling fears about current debt burdens. They also said such an increase is likely to impact their family members who cosigned the loans, their own family planning, future employment opportunities, and consumer confidence.
Tyler Dowden, a student from Northern Arizona University who expects to graduate with $25,000 in loan debt, would need to pay an additional $3,500 if the loan rate doubles.
“I am already worried about my ability pay my loans back,” Dowden said. “Adding several more thousand puts me further behind.”
In 2007, a Democrat-led House passed legislation that gradually slashed the rates on the subsidized loans until it eventually settled at the current low of 3.4 percent, but the measure will expire this summer.
Rep. Joe Courtney (D-Conn) and Sen. Jack Reed (D-Rhode Island), who attended the conference, introduced a bill to extend the low interest rate but admitted that getting it passed would be an uphill battle due to the pervasive hyper-partisanship in the House, the Associated Press reported.
The climate for higher education could also be of concern. Congress traded subsidized Stafford loans for graduate students in order to save Pell Grants from being cut as part of the Budget Control Act (known as the “debt ceiling deal”) last year.
Naima Ramos-Chapman is an associate editor at Campus Progress.
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