Congress opposes interest rate hike
By ASHLEY BOUCHER , News Writer
Published: May 16, 2012
College students will be worried about a lot more than which beach to visit this summer if Congress doesn’t avert a student loan interest hike scheduled for July 1. Stafford Loan interest rates have been fixed by the federal government at 3.4 percent but are set to rise to 6.8 percent.
Many political leaders hope to stop this increase because of the impact it will have on the finances of college students. However, there is debate on how to cover the costs that stopping this spike will incur.
Right now, a student with a $5,000 Stafford Loan at the current interest rate could pay it off with 118 monthly payments of $50. Ultimately, that student would pay $887.36 in interest from the loan.
But if the rate increases, that same loan would take 120 monthly payments of $57.54. That student would pay a total of $1,904.83 in interest during the course of loan repayment.
Stafford Loans are federally guaranteed student loans available to college undergraduates at a fixed interest rate and awarded based on financial need. These loans do not accrue interest while the borrowers are in school or during deferment after graduation.
Unsubsidized Stafford Loans are also available, but these will accrue interest while the student-borrower is in school. They can be deferred up to six months after graduation.
On Friday, Washington Senator Patty Murray held a rally in favor of the Student Loan Interest Act at South Seattle Community College. The act proposes maintaining the interest rate on subsidized loans at 3.4 percent.
The rally was short but passionate: Students held up signs reading “Thank you for supporting education” and “I can’t live on Ramen alone.”
Student body President Dante Obcena and Vice President Tysen Hillquist of South Seattle Community College took the podium to introduce the senator.
Obcena urged the crowd to shout along to a chant: “No ifs, no buts, no fees, no cuts.”
“Our future is being penalized before we have a chance to live it,” Hillquist said.
When Murray spoke, she praised students who lobbied in Olympia and reassured them she would not “let Republicans mess up [their hard work].”
Although some of the Democrats present at Senator Murray’s rally blamed Republicans for the stalemate in voting on the issue, Republicans also plan on keeping interest rates low for students. Senate Republican leader Mitch McConnell of Kentucky told The New York Times that both parties agree to keep the interest rate low. The question is how to do so.
Senate could not agree on a plan to keep the interest rates low during a vote May 8. Murray said Democrats wanted to close a tax loophole on the very wealthy to offset the cost of keeping rates low.
Republicans, by contrast, hope to extend the 2007 legislation that temporarily reduced Stafford Loan interest rates from 6.8 percent to 3.4 percent — in short, they hope to push back the July 1 date of interest hikes, Jonathan Weisman wrote in The New York Times.
According to Debbie Bristol, assistant director for Student Loans and Collections, 1,896 SPU students received subsidized Stafford loans out of the 3,200 students enrolled during the 2011-2012 academic year.
Seattle Pacific sophomore Alyssa Bray uses unsubsidized Stafford Loans and recognizes that the increase in interest rates will cause her to take longer to pay her debt.
“I believe God will completely take care of [my debt getting paid],” Bray said, “It’s just a matter of time.”
Senior Alexandra Hansen doesn’t personally have any Stafford Loans, but empathizes with students who do.
“The government should care more about students,” she said.
However, she would disagree with those at Senator Murray’s rally, who would put an additional tax on the very wealthy.
“We live in a country based on being able to work your way [into being wealthy],” she said. “It’s not fair to tax those who are wealthy just because they are.”
Junior Megan Snyder understands both sides of the debate.
“On one hand, it seems nice to put an additional tax on the very wealthy if you’re thinking Paris Hilton wealthy,” she said. “But then you have the question of cutoff and the bigger idea that all Americans are wealthier than the rest of the world.”
Hansen and Snyder both agreed that the line of “wealth” is blurry.
“Automatically, I would say that the Act [to keep interest rates low] should be renewed, but I don’t know that impact,” Snyder said.
Snyder, who has both subsidized and unsubsidized Stafford loans, worries about her ability to pay off her loans and the time it will take to do so.
“Obviously, a higher interest rate means you’re paying more money,” she said. “And the economy for college graduates worries me too.”
Snyder plans on going to graduate school after she earns her bachelor’s degree and said that taking out loans for that is “overwhelming and daunting.”