Congress has a matter of days left to work out a compromise or interest rates on some federal student loans will double. Five years ago, lawmakers offered students a reprieve — by cutting Stafford loan interest rates in half — but that ends July 1.
That’s left many students worried that their heavy debt burden is about to get heavier.
Ally Galvin knew it was going to be a stretch to afford college even with the merit scholarships she got from Boston University. She’s counting on a Stafford loan to help cover her tuition. When she showed up at BU for an early freshman orientation this week, she was more than a bit disturbed by the idea that her low-interest government loan may not be so low-interest after all.
“It’s impossible not to think about it,” Galvin says, “because it’s a huge financial burden. And especially if they double the rates, then it’s even a bigger thing to worry about.”
In the grand scheme of things, the extra thousand dollars or so she may pay in interest over 10 years isn’t enough to make her change plans. But it is painful, says her father, Mike Galvin. The bad economy, rising tuition and more expensive loans all create a kind of perfect storm driving the cost of college sky-high.
“It’s extremely frustrating. It just gets higher and higher. It’s going to be expensive,” he says.
Political Road Blocks
Both Democrats and Republicans say they’re in favor of extending the lower rate, but they can’t agree on how to pay for it.
In fact, many observers say lawmakers aren’t even trying, figuring there are more political points to be scored from making their opponents look like obstructionists than by making themselves look like champions.
Ali’s mother, Michelle Galvin, is appalled by what she sees as pure election-year politics.
“It’s just turned into this game,” Michelle Galvin says. “These kids are the future of this country and they’re paying the price. And it’s ridiculous.”
Boston University student Jack Florey says he’s overwhelmed by the idea that he will leave BU with $50,000 in debt. But he says students are beginning to organize around the issue and press for a more permanent solution.
“We’re mad as hell, definitely so,” Florey says. “For large parts of school, I am unable to afford food, unable to pay my taxes, unable to do lots of things because of how hard it is. I don’t feel like anyone in D.C. really realizes what we’re really struggling with and I feel like that’s going to boil over on campuses pretty soon.”
Earlier this month, hundreds of students rallied outside the Capitol and lobbied lawmakers on Stafford loans and the larger issue of college affordability.
Tiffany Dena Loftin, vice president of the U.S. Student Association, says the rate hike on Stafford loans is just a drop in the bucket, in relative terms, but it’s still not trivial.
“That’s rent for a month. That’s textbooks or to purchase a computer. That’s the cost of travel to and from campus. For students that are, you know, 17, 18, 20 years old, $1,000 is a lot of money,” Loftin says.
Other students — and parents — say Congress is missing the point, bickering over whether to charge 3.4 or 6.8 percent for student loans when there’s another big question.
As Pete Storm of Philadelphia, who has a son starting BU in the fall, puts it: “Should the federal government be in the loan business to begin with?”
He says Congress should just leave it to private lenders and the free market.
“Why are you legislating a rate that’s higher than free market when your intent is to subsidize education? You’re not subsidizing, you’re not helping, you’re actually hindering, so they should just get out,” says Storm.
But many students argue that would be even worse. It’s true that private lenders offer some loans at better rates, but they also offer much worse.
And those students say it would be poor and minority kids who don’t have good credit history who would end up getting stuck with loans that are much more expensive than even the higher government interest rates they may face after July 1.