[img id="97922" align="left"/] Already among the priciest in the country, a U of C education could become significantly more expensive for nearly a third of undergraduates on July 1, when interest rates on certain Stafford loans may double.
Roughly 34 percent of students in the College take on student debt while they’re here, many in the form of subsidized or unsubsidized Stafford loans from the U.S. Department of Education.
The interest rate for subsidized loans, which are need-based and do not accrue interest until after college, will double if Congress does not extend a 2007 bill which capped it at 3.4 percent. Despite bipartisan support for extending the lower interest rate, disagreement over how to provide the annual $6 billion needed to fund Stafford loans has delayed passage of the measure.
Second-year Stephanie Oehrlein, who takes out the yearly maximum Stafford Loan amount, said that the increased rate could harm her future education, limiting her options once she graduates.
“[An increased rate] makes going to graduate school a lot less desirable. It’s just finding the balance between [whether] the graduate program you’re going into is going to pay off in the end, or deciding that it’s not worth it—it’s too much,” she said.
Oehrlein’s boyfriend, fourth-year Josh Seale, has an idea of what it would be like for the rate to double. A German major looking into graduate schools, Seale has been considering about how he might pay for his education through unsubsidized, higher-rate loans since 2011, when Congress eliminated subsidized Stafford loans for graduate school. He hopes to enroll somewhere after taking a gap-year abroad.
“It makes it much harder for me to be able to potentially afford a Master’s program that isn’t completely covered by scholarships,” he said. “Given my current loans, [the program] would need to be really affordable for me. It wouldn’t really financially be an option for me to go to graduate school unless it was covered by scholarships.”
Unsubsidized loans are already at 6.8 percent interest, which also accrues while the student is in school, although payment isn’t due until nine months after college.
For other students, an increase in Stafford interest rates could lead to more immediate changes in lifestyle and spending.
First-year Paul Liu said he would rather cut back on expenses right away and try to take out fewer Stafford loans next year if a rate increase did go into effect. Liu said this could mean “less pocket money to spend for next year, or a change to a cheaper meal plan.”
SG President and fourth-year Youssef Kalad has been outspoken in his opposition to any increase in the interest rate that might require students to make costly sacrifices, such as, “choosing to cut back on buying food, choosing to cut back on buying books, choosing to cut back on all these other things that you should not be cutting back on as a student,” he said.
An increase in the Stafford loan rate might also deter students from coming to the U of C, one of a group of colleges that have broken the $55,000 mark for tuition and fees.
First-year Lisa Ringdahl could have been one of these students. Ringdahl said the University’s tuition was a major potential barrier to her enrollment decision. Without a Stafford loan, it may not have been possible for her to have matriculated at all. “If it had been much more, then I might not have come here,” she said.
Even if Congress manages to restore the rate after the July 1 deadline, Kalad said, the damage to students’ plans—and those of their families—will already have been done.
“Tons of people need to know, at the end of this school year…what’s going to happen with those rates. Because it dictates whether they’re even in housing, or off campus, what classes they’re going to take, how many books they’re going to buy, etc.,” Kalad said.
Adding fuel to the political climate surrounding higher education, the total amount of student debt in the United States recently topped $1 trillion.
Third-year Alexis Morris, who has taken out both subsidized and unsubsidized Stafford loans, said that everyone in college is affected, whether they borrow or not.
“All in all [the rate increase] is going to end up hitting the middle class,” she said. “Your liberal college education is all about diversity, but you can’t have diversity while missing a whole socioeconomic strata.”