- Published on Tuesday, 16 July 2013 17:06
- Written by Town Crier Staff
After the July 1 deadline expired, students applying for federally subsidized Stafford Loans face interest rates that have doubled from 3.4 to 6.8 percent for the 2013-2014 year.
Federal lawmakers are working to lower the interest rates, which many Republicans and Democrats agree are too high, but partisan bickering over how to address the matter leaves no solution in sight.
That doesn’t sit well with officials in the Foothill-De Anza Community College District, whose low- and middle-income students benefit from such loans.
“It saddens me that Congress did not maintain the 3.4 percent on student loans at this time,” Foothill College President Judy C. Miner said. “The economy has yet to recover fully enough to benefit the most recent
college graduates, and underrepresented communities show even more of an economic gap.”
Kevin Harral, Foothill’s director of financial aid, added, “The doubling of the Subsidized Direct Loan interest rate is a disappointing outcome to say the least. At this time, there does not seem to be much momentum to get it back down in the short term, but hopefully our elected officials are hammering out a long-term solution for student-loan interest rates.”
The good news, however, is that Harral does not expect an immediate impact on students borrowing money to attend Foothill.
“The unsubsidized interest rate has been 6.8 percent for several years, and the dollars borrowed last year are almost the exact same as dollars borrowed from the subsidized program, despite the significant interest-rate difference,” he said.
Harral reported 1,400 borrowers of $2.26 million in unsubsidized loans, compared with 700 borrowers of $2.33 million in
“The interest rate is not front and center for most students,” he added. “Even when told the rate, the impact is often a bit abstract until they go into repayment, often years down the road.”
The Republican-controlled U.S. House of Representatives passed a bill requiring that interest rates reflect the condition of the economy. The U.S. Senate last week considered a move to restore the 3.4 percent interest rates on the Stafford loans for one year.
“There is some dissension among the Democrats regarding what to do. Republicans are not the only ones holding it up,” said Howard Myers, president of Conservative Forum of Silicon Valley. “Many Republicans want to tie the student loan rate to an index and some Democrats don’t want to give up the revenue.”
“I think most people are not averse to the rate being able to adjust up and down in reasonable increments, as it was set up to do just about a decade ago,” Harral said. “But the fact that this rate just doubled, and really much more quietly than it was going to last year, when other lending rates are still very low and the economy is still depressed, just doesn’t seem reasonable.”
Rep. Anna Eshoo (D-18th District), who represents Los Altos, Los Altos Hills and Mountain View, estimated that approximately 8,500 students in her district have taken out low-interest loans.
“If they’re just starting out, the double rate applies,” Eshoo said. “If the student’s in the middle of loan, it does not need to be renegotiated. Interest rates are fixed for the life of the loan.”
Eshoo said she found it “befuddling” that the Stafford interest rates were allowed to double. As a result, she added, students could pay nearly $2,000 in interest.
“Our society and nation cannot secure its own future unless we have an educated population,” the congresswoman said. “Instead of creating a plus and a win, this represents a subtraction sign.”