Student loan interest rates could soon double
Jessica Beneke wants to eventually get a political science degree.
But for now she’s taking paralegal classes at J. Sargeant Reynolds Community College in Richmond, paying tuition with government-backed Stafford loans and wondering when she and her fiancé—both of whom have been paying for school with loans—might ever pay off their loan debt.
“It’s killed our credit,” she told U.S. Sen. Tim Kaine, who was at the community college Monday to talk to students about Stafford loans.
The interest rate on those government-backed student loans is set to double from 3.4 percent to 6.8 percent July 1 if Congress doesn’t act to change the law.
The increase would only affect future loans, not those that have already been taken out. But anyone applying for a Stafford loan for the next school year would pay about $540 more on a $3,500 loan, said JSRCC’s financial aid director Kiesha Pope.
That could balloon to thousands for students who borrow more money.
About 1 in 5 J. Sargeant Reynolds students —more than 3,000—use the loans, college officials said. According to Kaine’s office, 464 students at Germanna Community College use Stafford loans, as do 1,532 students at the University of Mary Washington.
Interest rates on the loans used to fluctuate, but were capped by Congress during the recession. That cap had an expiration date of last year, but lawmakers agreed to extend it for a year. Now that extension is expiring.
Kaine told the students there are several proposals in Congress, from both parties and both houses, to further extend the interest rate caps. He’s backing one that would continue the cap for two years, paying for it by eliminating some tax loopholes.
While the discussions go on in Washington, he said, he came to the college to hear from students firsthand, so he could return to Washington armed with their stories.
“It’s very important to hear what people are wrestling with,” Kaine said.
He got an earful from the group of students about the difficulties of getting an education when one’s parents can’t afford to help pay for it.
Several, like Beneke, said they had to wait until they were 24 years old to apply for loans independent of their parents, which they feel has put them behind in moving into careers. When Kaine asked how many of them are also working, all but Beneke raised their hands. This is the first semester in several that she hasn’t also held a job, Beneke said, and she can see the difference in her grades.
“I am amazed at how much easier it is; the stress is gone,” she said.
Students said they want to work, buy houses and cars and contribute to the economy, but they feel like the difficulties of paying for an education are holding them back.
Pope said some of the financial problems the students said they’ve experienced could be alleviated—they can consolidate loans, for example, she said, or look for grants instead of loans. She said students aren’t always aware of all the options available to them, in part because college financial aid is complicated.
Kaine told reporters that he hopes Congress can reach a deal to hold down the financial aid interest rates so people can get an education “without a choke hold of debt.”
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