Millions of students to see college loan interest rate double - KWWL - Eastern Iowa Breaking News, Weather, Closings

Millions of students to see college loan interest rate double

Posted:
WAVERLY (KWWL) -

Nearly eight million Americans can expect to see their student loan interest rates double on July 1. That's the day the College Cost Reduction and Access Act is set to expire.

The act, passed in 2007, reduced the federally subsidized Stafford Loan interest rate from 6.8 percent to 3.4 percent. Congress can opt to extend the lower rate or even make it permanent. Democrats, including President Obama, are calling for an extension. The majority of republicans believe the rate should return to pre-2007 levels.

Wartburg College freshman Maddie Stumbo is looking forward to graduating in three years. However, she says she's not looking forward to paying her student loan bills.

"I'm hoping it's not going to be very much, because I've declined some loans and taken from other things," Stumbo said.

The goal is to keep her final bill under $10,000, and so far, she's only taken out one type of loan, a federally subsidized Stafford Loan.

"The Subsidized Stafford Loan is a loan that students have to demonstrate need to receive, and if they qualify for that they don't have to pay interest for the loan while they're in school," Jen Sassman, Director of Financial Aid at Wartburg College, said.

The College Cost Reduction and Access Act gradually reduced the interest rate on the Subsidized Stafford Loan down to the current rate, 3.4 percent.

"Our students have at least benefited from that," Sassman said. "Since the law expires June 30th, the interest rate goes back up to its original rate, 6.8 percent."

An average Stafford Loan recipient is looking at paying an additional $2,800 in interest if they pay their loans off in ten years. If a student takes more out, they can expect to pay more too. A student taking out the maximum $23,000 in loans will pay an additional $5,000 in interest over ten years.

"On our campuses we're trying to educate students with borrowing as little as they can, and finding alternate ways to pay for college other than borrowing," Sassman said.

She said 86 percent of Wartburg students depend on some form of student aid, and the ones who qualify for Subsidized Stafford Loans are the ones who need it most.

"Students who really need it, how are they going to pay the higher interest? Especially with how tuition is rising?" Stumbo said.

Stumbo is hoping lawmakers think about students like her as they debate the issue and keep in mind a college education has never been more important or more expensive.

"It doesn't matter if you're democrat or republican, sometimes you have to come together for what's best for your constituents," said Stumbo.

Sassman did get the chance to visit with Iowa's lawmakers in Washington, D.C. earlier this month. She said they were very receptive to her concerns about the Stafford Loan interest rate increase.

If students have any questions about their loans, they are encouraged to call the financial aid office at their college or university.

Powered by Frankly