Written by Daniela Bartlett Asenjo
On July 1, college students and their parents all across the United States joined in a collective shudder as the news of subsidized Stafford loan interest rates doubling from 3.4% to 6.8% spread. While borrowers hoped that politicians in Washington would rise above the partisan gridlock to prevent the hike, it became clear that hoping wasn’t enough. The rate hike—which will add about $4,000 over the life of the loan—still stands, making it increasingly difficult for students to service their loans and participate in our nation’s economic recovery after graduation.
Enter the bipartisan Senate “compromise,” a proposal that ties the student loan program to the financial market, fixed to the interest rates of the 10-year Treasury bill. This compromise makes planning for college a nightmare for students and families who are unsure of what the rate will be year-to-year and are only guaranteed the certainty of soaring caps of 8.25% for undergraduate students, 9.5% for graduate students and more than 10% for parents. This plan, still being contested by several in the Senate including Elizabeth Warren (D-Mass), is also opposed by student and consumer interest groups nationwide, who take issue with the fact that the government stands to gain over a hundred billion dollars in the next decade off the backs of students. Our own Student Labor Action Project (SLAP) will join the American Federation of Teachers, National Education Association, United States Student Association, U.S. PIRG and several others in signing on to a letter to the U.S. Senate outlining these concerns.
The reality is that the interest rate increase on the subsidized Stafford loan is just a miniscule drop in an enormous bucket. Federal student loan debt has topped $1 trillion and will continue to hightail toward $2 trillion if substantive change isn’t made soon.
But we have to start somewhere. So as students find themselves floating up a creek without a paddle, it is time now to get out of the boat and swim toward shore. Go to the SLAP website to find out how to start a SLAP chapter on your campus to fight back against these trends, reach out to your local JwJ to move state legislation, or research where your university is investing—in students or in the banks.
References:
“Impact of Federal Student Loan Interest Rate Proposals on Cost of Borrowing.” The Institute for College Access & Success. June 21, 2013.
Davis, Susan. “Students reach deal on student loan interest rates.” USA Today. July 17, 2013.
Chopra, Rohit. “Student debt swells, federal loans now top a trillion.” Consumer Financial Protection Bureau. July 17, 2013
