One of the largest interest rate hikes on college loans is set for this Saturday, July 1, as student debt and the cost of attending college in the United States continue to rise. Federal student loan interest rates will rise and consequently, many students and alumni are scrambling to consolidate their loans. The move comes as a result of the Deficit Reduction Act signed by President Bush in February.
Interest rates on existing and new federal college loans will rise dramatically on July 1.
–The interest rate on Stafford loans will rise from 5.3 to 7.14 percent on existing loans and to 6.8 percent on new loans. This will mean $2,000 in additional interest payments for the typical undergraduate borrower who currently graduates with $17,500 in debt. [http://edworkforce.house.gov/democrats/pdf/raidonstudentaid.pdf]
–PLUS (Parent Loans for Undergraduate Students) loan interest rates will increase even more dramatically, from 6.1 to 7.94 percent for existing loans and to 8.5 percent on new loans.
The rising interest rates could not have come at a worse time for American families attempting to pay for college.
–The average student loan burden has grown by 60 percent in just seven years, and nearly two-thirds of all four-year college graduates now have student loans. [http://studentdebtalert.org/alert.asp?id2=20193]
–Tuition has increased by 40 percent at the average four year public school since 2001. [http://measuringup.highereducation.org/docs/nationalreport_2004.pdf]
–Earlier this year, the Republican Congress cut $12 billion out of student aid programs and has repeatedly flat-funded the Pell Grant Program.
Student loan debt creates serious obstacles for recent graduates.
–Student loan debt caused 14 percent of young graduates to delay marriage, 30 percent to delay buying a car; 21 percent to postpone having children, and 38 percent to hold off on buying a home in 2002. [http://www.nelliemae.com/library/nasls_2002.pdf]
–Student loan debt burdens have caused 27 percent of new graduates to delay a medical or dental procedure, 42 percent say that they live “paycheck-to-paycheck,” and 48 percent said that education-related debt had contributed to feelings of anxiety or sleeplessness. [http://www.alliancebernstein.com/investments/us/DisplayFile.aspx?cid=31934]
Education is a top concern for young voters.
–Young voters think that education is the second most important issue in need of congressional action after gas prices. [Tarrance Group and Lake Research Partners polling]
–Three times as many young voters think Democrats in Congress would do a better job on college affordability than Republicans (61 percent vs. 20 percent). [Tarrance Group and Lake Research Ibid.]
A few leaders in Congress are fighting for college affordability.
–Sen. Richard Durbin, D-Ill., and Rep. George Miller, D-Calif., have introduced legislation which seeks to cut interest rates on student loans in half, and congressional Democrats have made this plan part of their “New Direction for America” platform.
–This is a step in the right direction, but even more drastic action is needed if the United States is to get back on the right track, honoring our nation’s historic commitment to affordable education. Financial aid for low-income and middle-class families must be increased and debt forgiveness must be made available to graduates choosing to go into public interest and social-service fields. Finally, Congress must end corporate welfare that wastes billions of taxpayer dollars rather than efficiently increasing college affordability.
STUDENTS AND PARENTS AVAILABLE FOR COMMENT
“I needed to work two jobs in the summer and most of the school year to ensure that I was able to afford the high fees. In addition to working, I still have to take out loans and find other ways to fund my education. My first year alone, my parents and I took out $11,000 in loans and who knows what my financial situations will be the rest of my years here at UCLA. My second year, I was fortunate and only had to take out $3,000 but already my parents and I have $14,000 in debt … I could potentially be $40,000 in debt.”– Gregory CendanaLos Angeles, Calif.UCLA, Sociology Major916firstname.lastname@example.org
“My total debt over the four years will total to $46,474 … I come from a family below poverty level … I am ineligible for private loans. My federal loans are maxed out already. I worked hard in high school in Kentucky to get the state scholarships … I’m staying on campus over the summer to work full time … I’ve tried four different places and they all turn me down … The maximum combination of federal loans and grants amounts to $15,550 a year. Rose-Hulman Institute of Technology, one of the top undergraduate engineering schools in the nation, costs over $40,000 a year to attend.”–Sean FeeneyTerre Haute, Ind.Rose-Hulman, Computer Science Major859email@example.com
“As upper middle class, my parents were fully capable of supporting my college education. My dad works for United Airlines and the post 9/11 destruction done to the airline industry was financially devastating to my family … wrecked pension and pay cuts left my parents unable to pay for my education. It was infuriating to see the government do nothing as I watched family friends, once upper middle class, resorting to food stamps and welfare due to a weak economy and poor job market … I intend on being about $40,000 in debt by the time I finish my undergrad … I’m also the first in my family to go to college.”–Megan TrusnikBloomington, Ind.IU-Bloomington, Political Science & International Studies317firstname.lastname@example.org
“In 2003 I became a student at Johns Hopkins School of Medicine, one of the country’s premiere medical schools. I was shocked at the demographics of the medical student body. The vast majority of medical students come from the top quarter of incomes … The average medical student now graduates with more than $100,000 of debt and, as such, the pool of primary care physicians is shrinking … It is clear that there is a vast disparity in the ability of middle and lower class students to have access to medical school and affordable medical education.”–Julia SkapikBaltimore, Md.Johns Hopkins School of Medicine410email@example.com
“My debt and parents’ loans will be close to $46,000 … I had to leave Vermont for school, because not a single public university in New England offered a professional degree in architecture … Then came the annual double-digit tuition hikes in the subsequent years. I had been able to make it through the school year by working two and three jobs each summer, but could no longer do so. I started off selling plasma, and then had to pick up two jobs working nights as a server and a few hours a day as a student librarian. This past semester I was working between 35 to 38 hours a week to pay my nearly $900 in monthly bills … My parents don’t make enough money to save for retirement (my mom is a kindergarten and preschool teacher which earns her less than $20,000 a year).”–Jim MarcotteOriginally from VermontU-KY, Architecture802firstname.lastname@example.org
“I’m getting about $3,000 per quarter in loans. To help with child care, as my wife works full time, I have to maintain a grade point average and take full-time class loads to receive funds to help cover their day care. Day care is twice as expensive as our monthly rent. Rent $900 for two bedroom apartment, day care $1,800 for two children. That does not include food, gas, utilities, or anything else.”–Matt NisenoffDayton, OhioWright State, email@example.com
“My brother, Ryan, joined the army in order to be able to afford school. Our parents don’t make enough money to put three children through college, but they also make too much for us to qualify for grants. Now he is in Iraq. He is risking his life for an education.”–Amie KrebbsHouston, Texas816firstname.lastname@example.org
“Our daughter’s college education fund was all but wiped out with the collapse of the financial markets in 2001. That combined with being reduced to a one-income family, and my husband —a public school teacher whose income has been all but frozen for four years — means our daughter is two years away from high school graduation with virtually no means to attend college. We will depend on grants and scholarships to help her go.”–Virginia HirschMilwaukee, Wis.email@example.com
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**NOTE: For more information, please contact Anne Thompson at 202-955-5665.**