A recent decision by the U.S. Senate may spell bad news for struggling college students. On May 9the Senate failed to pass the “Stop the Student Loan Interest Rate Hike of 2012 Act,” an act that would have maintained the current interest rate on subsidized Stafford student loans at 3.4 percent. As it stands, the rates will double to 6.8 percent after July 1 if a solution is not enacted.
The legislation was supported by the Obama administration as well as Alaskan Senator Mark Begich. Following the failure of the bill, Begich expressed his concern for Alaskan students affected by the failed legislation.
“As the economy continues to recover, now is not the time to burden students who rely on these loans to finance their education with an additional 1,000 dollars in payments,” explained Begich in a recent press release.
The Senator isn’t the only one concerned with the looming interest rate hike. Eric Pedersen, UAA’s Associate Vice Chancellor of Enrollment Management, has also voiced his opinion about the decision.
“No one in Student Affairs is in favor of the interest hike,” said Pedersen. “Students should be very worried about this issue.”
To illustrate the impact of the decision, Pedersen explained that a student that borrowed the maximum over a four-year period would pay an additional 5,200 dollars in interest on a ten-year repayment period.
“You may not feel that cost today, but you’ll feel it after you graduate,” Pedersen said grimly.
The student loan legislation has failed primarily due to a deadlock between the Democratic and Republican parties. Though each party has agreed to avoid an interest rate increase, the two sides disagree on how to fund it.
The Congressional Budget Office has estimated the cost of maintaining the current rates for an additional year to be nearly six billion dollars. Republicans seek to cover this expense by eliminating funding toward the Prevention and Public Health Fund of the new healthcare act, while Democrats plan to fund the move by abolishing a tax loophole for small businesses.
With the July 1 deadline looming ever closer, Pedersen remains hopeful that a solution will be found to avoid the hike.
“It is my opinion that ultimately, no senator or representative will want to be associated with the statement that ‘Congress failed to help college students.’ I would hope that something would be done to keep the rates at 3.4 percent,” said Pedersen.
Senator Begich echoed this sentiment in reference to the impending hike and expressed his confidence in Congress to construct a solution.
“I am optimistic we can still come up with a solution to help our young people before the July 1 deadline because it is the right thing to do,” Begich stated.
The federal government isn’t the only organization concerned with the increase; Alaska State Representative Les Gara has also constructed a possible state solution with House Bill 272.
Gara’s bill is designed limit student burden by reducing the cost of borrowing loans for students who stay in or return to Alaska. After two rewrites the bill is currently undergoing work in the House Education Committee.
Though many are working on possible solutions, UAA students have cause to be concerned. According to Pedersen approximately 51 percent of University of Alaska students graduate with some form of debt. This figure, though still under the national average of 60 percent, is startling given the potential interest rate increase.
“If we took the 251 graduate students with loans at UAA, as a group they would pay an additional 209,000 dollars after the interest hike,” stated Pedersen.
Students affected by the hike are certainly worried about the costs, and many are voicing their frustration toward the legistation.
“If the government wants to everyone to pursue higher education, then this is an awful move. This only hurts students who already need help with their education costs,” said UAA sophomore Kyle Pealatere.
For those worried about the possibility of the substantial increase, there are a few options available. Students can apply for private scholarships, look for other student loans and find other creative ways to cut costs.
“The best thing for students would be to look at all the costs and try to find a way to reduce expenses to reduce the need to borrow” said Pedersen. “Students could shop around for other student loans but they must read the fine print.”
Though options do exist to help students cope with the cost of rising interest rates, for many this is not enough.
“We’re on student loans for a reason; we don’t have the money to cover the rate increase,” explained Pealatere. “I don’t want to be well into my thirties and still be paying off my student loans.”