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Saturday, February 24, 2024

Stafford Loan interest rate will expire this summer

About 8 million low- to middle-income students will see an increase in interest rate of the subsidized Stafford Loan when it expires this upcoming July. The current rate is 3.4 percent; it will increase to 6.8 percent by this summer.

According to CALPIRG Federal Higher Education Advocate Rich Williams, this issue is a big priority in Congress at the moment, which is working to keep higher education accessible.

According to opencongress.org, the interest rate for the subsidized Stafford Loan decreased over the years due to the College Cost Reduction Act of 2007, which “seeks to lower the cost of higher education by reducing lender subsidies by $19 billion and then investing those funds in programs that increase grant amounts to students, improve access to student loans, cut interest rates on student loans, provide for the repayment of parts of the loans through employment or service in areas of national need, and reward colleges for lowering costs to students.”

“An issue with student loans is that it does not provide protection for students,” Williams said. “There isn’t enough protection to insure that students won’t be forced to delay buying a home, getting married, going into retirement early all because they have to pay back loans.”

Therefore, there is a push on Capitol Hill for students to receive the same rights as other consumers, such as those who are able to declare bankruptcy.

The interest rate in 2006 on the Stafford Loan was set at 6.8 percent and it has gradually decreased over the years until its expiration date this July.

President Barack Obama is urging Congress to keep the interest rate at 3.4 percent for one more year until there is a viable solution. Students who take out the maximum $23,000 loan can save up to $5,000 in loan debt if the current interest rate is kept in place.

Williams said that with rising college costs, increasing interest rates is one of the last things this economy needs.

Although it seems like there is an increase in interest rate, some people would say otherwise.

“Framing the expiration as an increase makes it seem as though Congress cynically debated and passed a bill to impose higher rates this year — something Congress didn’t do. Therefore, calling it an expiration is more appropriate,” said Abimael Chavez-Hernandez, a sophomore political science and philosophy major.

Publisher of FinAid and Fastweb Mark Kantrowitz said that if the government chooses to fund billions of dollars to keep the rate low, then it would have to cut funds for other financial aid such as the Pell Grant, which low-income students rely on. In the end, Kantrowitz said that it is better for the federally subsidized Stafford Loan to return to 6.8 percent rather than cutting other grants.

Over 130,000 students have sent letters to Congress and some have publicly spoken against this increase. Williams said students should contact their representatives about this issue as soon as possible because there are only three months left before the expiration takes effect.

MEE YANG can be reached city@theaggie.org.

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