The already high cost for college students considering federal student loans is set for a significant increase on July 1.
Unless congress steps in to stop this, Federal Stafford loans, which are currently at an interest rate of 3.4 percent, are set to increase to 6.8 percent, doubling the current rate. According to the Institute of Education Sciences, close to 40 percent of all students in the United States take out Stafford Loans.
“The greatest impact will be on middle-income families that make just over the Cal Grant and Pell Grant [grants set aside for persons with lower incomes] thresholds because they will not qualify for federal or state aid, especially in high-cost living cities like San Francisco,” said Catherine Marroquin, College Connect program director at Mission Graduates, a nonprofit dedicated to preparing students K-12 for college.
The proposed rate hike is an increasingly magnified point of frustration for many lower income families. “I’m shocked that the government is considering making it even more difficult for our children to get into college,” said Bay Area parent Erik Morse.
For many students, added obstacles like increased interest rates pose a significant burden on their decision to make college a reality. “I don’t like thinking about it,” said high school junior Raúl Moreno. “My brother does construction, I may just do that instead.”
Scheduled to take effect in 2012, the rate hike was postponed by Congress to avoid it’s potential effect on the presidential election.
Members of Congress and other government leaders are offering a grab bag of solutions. Democrats as well as many Republicans are in support of President Obama’s proposition of attaching student loan rates with market interest rates. Subsidized loans would get an increase of 1 percent, while the bump would be 3 percent for unsubsidized loans and 4 percent for graduate loans.
In comparison to the current hike proposed by Congress this would mean a decrease in subsidized loans (from 3.4 percent to 2.7 percent), unsubsidized loans (from 6.8 percent to 4.7 percent), and direct graduate loans (from 6.8 percent to 5.7 percent).
Many members of Congress would like to consider other options. The Comprehensive Student Loan Protection Act proposed by Senators Tom Coburn, (R-Okla.), Lamar Alexander, (R-Tenn.), and Richard Burr, (R-N.C), is one such offering which would raise the interest rate on subsidized Stafford loans to 4.73 percent, increasing the current rate by 1.3 percent.
Another option being discussed is the Student Loan Fairness Act, sponsored by Rep. Karen Bass, (D-Calif). This bill proposes to permanently extend the current Stafford loan rate of 3.4 percent. This bill also proposes to nullify a student’s debt after 10 percent of the students annual income has been deducted for payments on student loans for 10 years.
In California, resources are available for low-income families, regardless of residence or documentation status. Options like Individual Development Accounts for education, private scholarships, and applying to the FAFSA or the California Dream Act are resources that families can use to attain their college goals.
“It is critical that we get information out to the Latino community that cost does not have to be a barrier to attending college … Unfortunately (most) families do not get enough education about financial aid to begin with,” said Marroquin. “We believe access to higher education is a right. Increasing the interest rate on students will hamper access … It is critical for the government to prioritize education and our youth.”
For help with college preparedness you can contact Mission Graduates at 3040 16th St. or visit www.missiongraduates.org for more information.