Keene Sentinel: Threat of a loan interest increase worries local students
A potential increase in the interest rate on some student loans is raising concern among local college students.
The interest rate on new federal subsidized student loans, also called Stafford loans, is set to double July 1, from 3.4 percent to 6.8 percent, unless members of Congress agree to postpone the increase, as they did last year.
“It’s certainly scary, especially for newer students just entering college,” said Kyle J. O’Brien, a senior working on his second bachelor’s degree at Keene State College.
Last year, 3,880 students at Keene State received a total of $25,236,770 through federal Stafford loans, according to college data. Of that amount, $12,379,541 was subsidized by the government. About 77 percent of the approximately 5,700 students at Keene State receive some type of student loan, according to college data.
Interest on subsidized loans doesn’t start accruing until a student graduates or drops below half-time enrollment, and the rate is half of that of unsubsidized loans. The increased interest rates would only affect those students taking out new subsidized loans.
O’Brien and his sister Hillary, also a senior, said their father made them think long and hard about their finances, so they considered interest rates and repayment figures before accepting federal loans. But it’s not that way for all students.
“To a lot of people, it’s just a number that they don’t think to worry about,” Hillary O’Brien said. “When you’re an undergrad, having that sense of indebtedness just isn’t really there.”
Officials with the college’s financial aid office have talked with hundreds of families who attended the school’s recent events for admitted students, but didn’t hear any concerns about the potential increase to subsidized loan rates, said Amanda Foskett, an assistant director with the office. Families more often are concerned with their options to pay for costs not covered by financial aid, she said via email.
For a student borrowing $10,000 with a repayment period of 10 years, the doubling of interest rates would be an increase of nearly $17 per month, for an increase of about $2,000 in interest paid over the life of the loan.
Doubling the interest rate would generate an estimated $6 billion in additional revenue next year for the federal government.
Keene State freshmen Zach M. DeJesus, Zach V. Brown and Melanie M. Zorko didn’t know about the deadline for subsidized interest rates to double, but they’re upset about it.
They admit they’ve put off thinking about loan payments until closer to their graduation and are happy their parents are able to help them pay for college.
But they said rising interest rates are just one more financial hoop incoming students will have to jump through. Each of them plans to go to graduate school, and that’s when they worry the loans will really start to add up.
“I’m going to be broke for a long time after college,” DeJesus said matter-of-factly.
That’s exactly what those in favor of keeping interest rates down worry about.
Young graduates who are hampered by paying back loans might be forced to put off buying a car or building or buying a house. Or young people who can’t afford the rising, long-term cost of college might choose to forgo a degree, and both of those scenarios negatively affect society and the economy, said U.S. Rep. Ann McLane Kuster, D-N.H.
Kuster and Rep. Carol Shea-Porter, D-N.H., were among nearly 100 lawmakers who signed on to support legislation introduced last week that would prevent student loan rates from doubling in July and extend the current rate for two years.
U.S. Rep. Joe Courtney, D-Conn., introduced the legislation, just as he did last year when Congress chose to delay the increase for a year.
The additional time would give educators and budget makers time to work together to address the issue of access to and affordability of higher education, Kuster said during a stop in Keene earlier this week.
Other possibilities for the future of government-subsidized loans also have been introduced recently. The Senate passed a budget resolution in March that extended the 3.4 percent rate indefinitely. Meanwhile, the White House budget released earlier this month suggested a variable interest rate, where rates would change annually based on the government’s cost of borrowing.
Kuster said she could see a floating rate working, but only if Congress sets a maximum rate, so it doesn’t balloon into the double digits in the future.
The congresswoman’s support of postponing the hike in interest rates comes on the heels of a piece of legislation she introduced that was also tied to education.
Her workforce development and job training bill would provide tax credits to businesses that work with community colleges and universities to train students with skills necessary for high-paying jobs.
Kuster touted the legislation at a tour of precision manufacturing company Knappe & Koester Inc. in Keene Wednesday, where company leaders and representatives from River Valley Community College and the Regional Center for Advanced Manufacturing said her legislation would help small manufacturers by giving them an incentive to take the risk to invest in training workers.
The bill would provide up to $10,000 in annual tax credits for employers that help develop curriculum, help with classroom instruction or offer internships or apprenticeships for students.
While walking through the shop at Knappe & Koester, Kuster pointed out a bumper sticker taped to the side of a large machine making fuel nozzles for jet engines.
“’If you think education is expensive, try ignorance,’ “ she read. “That could be the motto for our legislation.”