Next month, college graduates could see the interest rates on their student loans double if congress doesn’t take action. A 2007 law designed to keep interest rates on federally subsidized Stafford loans low, is set to expire July 1.
“Every student should have the opportunity to go to college, regardless of their family’s income,” said Zainab Javed, a sophomore at Mercyhurst College in Erie. “But if Congress allows the interest rates to double, that will not be possible.”
Congress is set to vote this week on legislation that would keep the current student loan interest rate of 3.4 percent from doubling to 6.8. If the legislation is not passed, approximately 1.5 million African-American students would see their student loan debt increase.
“College is not cheap and I didn’t have the money to pay for it,” said Abu Edwards, a first generation college graduate from the class of 2012. “I was able to apply for a Pell grant. This combined with student loans and work study, (is the reason) I was able to go to college.”
President Obama has made education a national priority, calling on congress to avoid an increase in student loan interest rates, and doubling the federal government’s investment in Pell grants to expand access to 3.7 million more students. In Pennsylvania alone, 313,000 students received Pell grants for college last year.
If the student loan interest rates double, it won’t just hurt the thousands of college graduates already struggling to pay back their students loans. It could also lead some students, who do not want to take on additional student loan debt, to decide not to return to college in the fall and others to decide not to pursue advanced degrees.
“I was the first person in my family to go to college, but thanks to President Obama, my story is not unique,” Edwards said. “For me, my bachelor’s degree is just the beginning.”
Over the lifetime of an average student loan, the White House said this increase in interest rates would equal $1000 in additional debt. However, depending on the amount of the loan and the length of repayment, an increase in interest rates could mean upwards of $5000 in additional debt.
“While some African-American students are fortunate enough to come out of college debt-free, many are not,” said John Wilson, executive director of the White House Initiative on Historically Black Colleges and Universities. “Increasing the student loan rate at a time when America needs a workforce that can compete in this global economy is not smart business. It’s simply unfair. Going to college shouldn’t be a luxury for a few, but a realistic goal for all students regardless of their economic backgrounds.”
Republicans in congress have opposed extending the 2007 College Cost Reduction and Access Act because they say it will add to the federal deficit. One possible solution for funding the extension, which would cost $6 billion, is to charge companies more to insure their pensions and to change regulations to prevent companies from taking multiple tax deductions for their pension contributions.
“No prudent economist is looking back at 2008 and saying that deficits caused this problem,” said Pennsylvania Treasurer Rob McCord. “It’s very prudent to say if we have to fund the reduction of loan interest rates, put it on the wealthy people. We should not be repealing prudent public investment.”