With Congress failing to reach an agreement to extend a reduced rate for federal subsidized student loans, the cost of education will increase for many students.
On July 1, the rate for Stafford subsidized loans — which do not accrue interest while students are enrolled in school — doubled from 3.4 percent to 6.8 percent. These subsidized loans are the primary method for students across the country to pay for their education, according to Director of Financial Aid Joel Carstens. The increased rate could discourage some students from borrowing, he added.
“For students that are sensitive about loans, this is the primary vehicle they’re using to fund their education,” Carstens said, “this will be a disincentive to pursue higher education.”
Penn students, however, won’t be hit as hard as students at other universities, he added. Penn has a no-loans financial aid policy, but about a third of students take out at least one federal subsidized loan to help cover their family’s contribution.
Of the class of 2013, 835 students borrowed an average of $8,828 in federal subsidized loans, according to Student Financial and Registration Services.
For the average Penn borrower, the rate change will cause an almost $2,000 increase in total interest over the life of the loan, given a 10-year repayment plan, which Carstens said is typical.
Penn has lobbied lawmakers in Washington to extend the lower rate, but to little avail. Associate Vice President for Federal Affairs Bill Andresen has met with the Pennsylvania delegation, as well as staffers for members of the Senate Committee on Health, Education, Labor and Pensions. In addition, a group of students and administrators made a trip to Washington on June 21 to discuss the personal impact on financial aid with Congressional staff.
“The problem is the House and Senate are on two different paths right now,” Andresen said. While the House passed a bill to extend the lower rate, the Senate failed to reach a 60-vote supermajority on any proposal.
Andresen noted that a recent Senate proposal may be able to get traction, but said that he “can’t predict what the House Republican majority will say.”
“I’m slightly more optimistic that when Congress comes back [after its July 4 recess] they will feel some pressure on them to deal with it,” he said. “The reality is the two parties aren’t that far apart on the issue, so it won’t take much compromise.”
He said the University will continue to push for an extension of the lower rate, which could be implemented retroactively to July 1, but added that most legislators already want to find a compromise.
“With an issue like this where everyone wants to get a solution, it is frustrating for people around here,” he said.Comments powered by Disqus
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