Student loan interest fracas far from solved with latest House bill
"This would impact our students greatly," Cal Maritime Director of Financial Aid Nicole Hill said. "This is a subsidized loan so it's interest free while in school but during the repayment period the interest would double."
At issue are interest rates on federal student loans which were set to double on July 1, because no compromise had been reached in Congress on a financial aid package which expired without a new agreement in place.
For graduating seniors who would take out the maximum federal loan amounts, or $18,500, they would pay $7,047 in interest under the threat, as compared to $3,348 in the current, lower rate of interest.
Lawmakers from both parties said they want to avoid the increase but were divided on how. Interest rates on new subsidized Stafford loans were to rise from 3.4 percent to 6.8 percent.
The House of Representatives on Thursday passed legislation that would reset interest rates on federal student loans and avert doubling of interest rates on July 1.
But the controversy is far from over as Democratic lawmakers and education advocates decried the Republican bill as one that will increase the cost of college.
However, some Democrats believe H.R. 1911 would make the student loans and the cost of education even more expensive than under previous proposals.
The bill would set interest rates on both types of Stafford loans at the 10-year Treasury yield -- currently around 2 percent -- plus 2.5 percent. In addition to subsidized Stafford loans, in which interest doesn't accrue until after a student graduates, the measure would also affect rates for unsubsidized loans. The latter are available regardless of financial need.
Rep. Mike Thompson, D-St. Helena, issued a statement saying he voted against the bill because it would make college more expensive through loans with fluctuating interest rates.
The bill would charge millions of students and families $3.7 billion over the next decade in additional interest payments relative to current law, said Thompson, referring to the nonpartisan Congressional Budget Office.
Thompson said the House Majority's Leadership has refused to allow the House to consider his bill which would block student loan rates from doubling on July 1.
Hill from Cal Maritime said she hopes federal lawmakers can sit down and work out their differences and come up with a proposal that makes sense.
"I would like to see the interest rates be more market rate competitive," she said. "I would also like to see them be fixed and not variable."
The latest battle over federal student loans is just another indication the government student aid package needs to be revamped, Touro University Director of Financial Aid Lynne Moseley said.
Touro's graduate students, however, are not impacted by the latest crisis.They are ineligible for unsubsidized loans which are available only to undergraduates.
A big problem, she said, are students paying consolidated loans with interest rates up to nearly 9 percent. "People are up in arms that federal loans are having these exorbitant interest rates," Moseley said.
Contact staff writer Sarah Rohrs at firstname.lastname@example.org or (707) 553-6832. Follow her on Twitter @SarahVTH.
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