Recent college graduates often face a mountain of debt that can take years, if not decades, to pay off. And if nothing is done, they might be considered the lucky ones.
Rep. Paul Tonko, D-Amsterdam, SUNY officials and University at Albany students rallied on Monday, July 1, for a freeze of federal student loan rates at 3.4 percent for two years as Congress develops a long-term solution. Since no action was taken before July 1, with Congress in recess until July 8, new borrowers of federally subsidized Stafford loans face an interest rate of 6.8 percent. This wouldn’t affects student with existing federal loans.
“The efforts here today are to sound the alarm,” Tonko said on Monday. “This is a problem that I think is self engineered. We have had plenty of time to work on this situation … so another manufactured crisis is the outcome in Washington.”
As of the afternoon on Tuesday, July 9, Congress has not finalized any deal over the federally subsidized student loan rates.
Tonko said students are “severely” impacted by debt, which hurts the economy, hampers small business growth and acts as a “barrier” for young entrepreneurs. The amount of student loan debt has surpassed credit card and auto loan debt, according to federal officials.
Tonko said student loan debt has quadrupled over the past decade.
UAlbany senior Kevin Fox, who is double majoring in political science and communications, said he chose the university for the “value” and “quality programming.” He said as student loan debt continues to grow, tuition has risen at twice the rate of inflation.
“When Congress talks about investing in our future, this should be priority number one,” Fox said. “Students like me, who are going to be graduating, are already under enough of a burden trying to start their careers … while at the same time struggling to pay off their student loan (interest) rates.”
Fox added his sister was at the campus Monday, too, taking a tour of the college before entering in the fall. He said she turned down offers from Rochester Institute of Technology and Rensselaer Polytechnic Institute to attend UAlbany.
More than 7 million students nationwide tap federal loans to pay for college, and around 66 percent of graduates hold federal loans, according to Tonko’s Office. The average amount of federal loans for a student totals around $26,600.
Stafford loans are offered in unsubsidized and subsidized forms, with a financial need only required for subsidized loans. The increased rate of 6.8 percent interest for subsidized loans now matches unsubsidized loans.
“Quality higher education should not be a luxury for a privileged few, who may not need those loans, but should be available to everyone,” Tonko said. “Everybody deserves that opportunity to stretch their intellectual power … to be able to contribute their talents, their skills, their passions to the development of a community.”
The average New York student with a subsidized Stafford loan borrowed around $3,800 this year. The legislation Tonko lauds claims to save such borrower an average of $1,000 over the course of the loan.
The U.S. Department of Education estimated the annual price for undergraduate tuition, room, and board for 2010-11 school year was $13,564 at public institutions, $36,252 at private not-for-profit institutions and $23,495 at private for-profit institutions. From the 2000-01 school year, this represents a 42 percent increase at public institutions and a 31 percent increase at private not-for-profit institutions.
On May 23, a student loan bill pushed by U.S. House Republicans was passed that would tie student loans to a market-based interest rate. Student loan rates would also be adjusted annually to match the market. The Senate majority said it would not bring the House bill to the floor for a vote.
The nonpartisan Congressional Budget Office said the House GOP’s student loan bill would eventually cause interest rates to settle at around 7.7 percent. Tonko said the additional burden of around $2,000 over the lifetime of a student loan was unacceptable.
Fox, a 24-year-old, said he opposed the House GOP plan, and also rebuked Congress for potentially allowing the interest rates to increase because of inaction.
“It is almost unthinkable to me that Congress would double the interest rate at a time like this when the economy is doing so poorly and make it that much harder for students to start their lives when they get out of college,” Fox said.
Tonko said the issue has received “a lot of scrutiny” and hoped lawmakers would agree to the proposed two-year extension.
Besides paying higher interest rates, Tonko said another negative effect could be an influence on students to choose a different major.
Though loans did not affect her career choice, UAlbany senior Jen White, of Bethlehem, said they could affect her going on to graduate school.
“I may choose to not go because I am too afraid to be saddled with the loans and the debt,” White said.
White said she went to a private college her first year, but transferred to Albany for the value it offered.
“I am still going to be in debt here … but you really have to look at the value of an education nowadays,” she said. “A rise of interest rates is just outrageous in this economy.”
White said fellow students do stress about paying off student loans, and some wonder if they’ll even find a job within six months of graduation, when the first check is due. Her two sisters are attending private colleges.
“Money needs to be made, but this is the incorrect way to do it,” she said. “To think that it will be more stressful is frightening.”