Students await financial fate with interest rate
Student loan debt isn’t new. The balloon, which has been dwarfing credit card debt in recent months, has economists worried about its eventual burst.
Last week, politicians, media outlets and students alike were concerned about the possibility of the student loan interest rate doubling from 3.4 percent to 6.8 percent on July 1.
The U.S. House of Representatives intervened by passing the Interest Rate Reduction Act with a vote of 215 to 195.
Passage of the bill’s Senate equivalent and President Barack Obama’s approval would result in the interest rate remaining stagnant.
While it appeared that indebted college students dodged a bullet, they weren’t even in the crosshairs.
James Stanger, associate director for technology and support services in the Youngstown State University Office of Financial Aid and Scholarships, said the interest rate hike isn’t “quite as dramatic as some of the politicians make it seem.”
Only loans taken out after July 1 would be subject to a higher interest rate, should both parties and Congress be unable to reach an agreement.
House Republicans propose that the lost revenues be compensated with deep cuts in the Prevention and Public Health Fund, which was created by the Patient Protection and Affordable Care Act.
Democrats, however, believe higher taxes on profitable private corporations would be an appropriate remedy.
“That’s just politicians being politicians,” Stanger said. “They’ll create as much press and grand standing as they can, and eventually, at the last second, they’ll compromise, and we’ll see the 3.4 [percent] stay intact.”
Stanger, who said he is a casual observer of American politics, doesn’t think it’s fair for students’ financial status to be subject to partisan feuds.
Students said they feel like they’re trapped in the middle of an ugly dispute.
Freshman Ta’Rae Murphy said he feels cheated.
“They’re raising the price on me going to school,” Murphy said.
He said he’s contemplating attending a trade school if interest rates do end up doubling.
Senior Jay Cramer said he estimates that he’ll graduate with more than $40,000 in debt. Despite his academic status, he’ll be attending YSU one more year and be potentially subject to higher interest rates for the last loan.
“No, [it’s not fair], but what are you going to do about it?” Cramer said.
Murphy, however, said he could face higher interest rates for the remainder of his college career.
“I think [Congress] really needs to re-evaluate it more,” Murphy said.
The interest rate isn’t the only attempt to shift the higher education burden off the federal government’s back, though.
In the past two months, the duration of the Pell Grant has been scaled back, and nonprofit servicers have taken over a vast majority of federal student loans.
Controversy, illegal practices and other scandals have plagued several of the servicing organizations that the U.S. Department of Education has put in charge of student loans, but Stanger said he believes these aren’t representative of the whole.
“I’ve heard a little bit of it, but it would have been worse if the servicing would have been done by the [U.S. Department of Education],” Stanger said. He said the total volume of loans would have led to more problems if overseen by bureaucracy.