The fate of the Stafford loan interest rate is still hanging in the balance as the U.S. Senate struggles to reach an agreement on whether to let the interest rate double or to leave it as is.
On July 1, the 2007 law that kept the Stafford loan interest rate at 3.4 percent expires, according to an April 20 Huffington Post article – which means the Stafford loan rate is set to go from 3.4 percent to 6.8 percent.
To stop the rate from automatically doubling on July 1, the Senate has to vote to keep the rate at 3.4 percent. According to press releases from the White House, on both May 8 and May 24 the Senate was unable to reach a verdict, leaving just more than a month until the rate hike.
The Huffington Post reported that 130,000 college students wrote letters to Congress in March asking to keep the Stafford loan rates low.
But it’s not just students who are speaking out about the possible upward climb of the Stafford loan’s rate. U.S. Rep. Gary Peters (D-Mich.) has been advocating for bill H.R. 3826 – along with Rep. Joe Courtney (D-Conn.) – which would keep the federal loan’s rate at 3.4 percent if passed by Congress, according to The Huffington Post.
“Before I came to Congress, I counseled Greater Detroit area families on financial planning for their future,” Peters said in a May 2 press release. “I’m fighting to do everything possible to make college more affordable and more accessible to all young people because a college education is the key to a bright future. If Congress doesn’t act, our children will be the ones who pay the price.”
According to Peters’ May 2 press release, students who accept a Stafford loan with a 6.8 percent rate would accrue an extra $1,000 in debt per year they attend school unless Congress votes against it.
President Barack Obama has also come out as a major supporter of low interest rates in the past couple of months, arguing that college should be kept affordable for students.
In a May 24 press release from the White House press secretary, Obama spoke out about the predicament, saying it was Senate Republicans who “have not proven that they’re serious about resolving this problem.
“For the second time this month, they voted to ask millions of students to pay an average of $1,000 each, rather than close a loophole that allows the very wealthy to avoid paying their fair share,” the White House press release said.
Some adversaries have come forth to challenge the arguments made by advocates such as Obama and Peters. Mark Kantrowitz, publisher of two websites about paying for college, and Lynn O’Shaughnessy, author of “The College Solution,” voiced their opinions in a May 9 New York Times op-ed titled “Much Ado About Double or Nothing.”
In their op-ed, they wrote, “It’s true that a very high percentage of students who graduate with debt hold a subsidized Stafford loan,” but they wrote that if the interest rate on the loan doubled, “very little will happen.”
“If a student borrowed the average subsidized Stafford loan ($3,357) at 6.8 percent for the next school year, the higher interest rate would boost the borrower’s debt burden by $761 over a 10-year repayment period,” Kantrowitz and O’Shaughnessy said. “Even if the interest rate doubles, the monthly payment on the subsidized Stafford loan would increase by only about one-sixth.”
Kantrowitz and O’Shaughnessy said that the rate increase “won’t affect previous loans, only new loans borrowed for the 2012-13 school year.”
But for the Obama administration, helping students get a college education at an affordable rate is the goal.
“With only a few days left until student loan interest rates double,” the White House said in their May 24 release, “it’s time to get this done so hardworking students get a fair shot at an affordable education.”