Lockport Union-Sun & Journal — Interest rates would double on federally-subsidized Stafford loans if Congress doesn’t act by July 1. More than 60,000 students in Western New York have used such loans to pay for college.
And U.S. Sen. Charles Schumer is bringing a bill to the Senate floor that would extend the current 3.4 percent interest rate for two more years. Allowing the interest rate to rise to 6.8 percent would add about $4,000 extra per student over the next 10 years, according to the National Student Loan Data System, Schumer said.
“It’s bad for students,” he said in a conference call Wednesday. “Student debt shouldn’t weigh them down.”
In 2007, Congress lowered the rate on subsidized Stafford loans the College Cost Reduction and Access Act of 2007 set fixed interest rates on newly subsidized Stafford loans for undergraduate students to 3.4 percent over a set period of time; 6 percent in 2008-09, 5.6 percent in 2009-10, 4.5 percent in 2010-11 and 3.4 percent in 2011-12.
Last year, Congress voted to freeze interest rates for need-based federal student loans, preventing them from doubling for a year. Schumer, who was involved in bringing the interest freeze to a vote, said he would join lead sponsor U.S. Sen. Jack Reed (D-Rhode Island) in bringing the Student Loan Affordability Act of 2013, to the Senate floor before the “doubling deadline.”
“The cost of college is already skyrocketing and there is no sense adding insult to injury by allowing the Stafford loan rate to double, piling additional costs on students and families,” Schumer said. “Congress need to come together to extend the rate at its current level, so that more students in upstate New York can walk across the stage and receive a diploma in the coming years, not less. It’s time we do more to invest in our students, not less.”
Stafford loans are offered on the full faith and credit of the United States government so they can be offered at a lower interest rate than they would be privately. For subsidized loans, the federal government pays the interest for the period that the student is in college, unlike unsubsidized Stafford loans.
Freshmen in college are eligible for unsubsidized Stafford loans up to $3,500, while sophomores are eligible for up to $4,500 and juniors and seniors may receive loans up to $5,500 for each of the last two years of school.
The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but rather new loans that will be disbursed after July 1.
The Student Loan Affordability Act of 2013 would maintain the current interest rates for the next two years as Congress works towards a long-term solution in the reauthorization of the Higher Education Act, Schumer said. The cost of the bill would be offset by closing tax loopholes and not from other already strapped education programs, the senator said.
U.S. Sen. Elizabeth Warren (D-Mass.) introduced a bill last week that would give college students the same interest rates on their federal student loans as banks do when borrowing from the Federal Reserve.
Schumer said he liked Warren’s plan, but it does not address extending the current rate before July 1. That bill is more of a long-term fix and would be more difficult to get passed before July, Schumer said.
”It’s not a sense of urgency,” he said. “But I do agree with her.”Contact reporter Joe Olenick at 439-9222, ext. 6241 or follow him on Twitter @joeolenick.