U.S. Sen. Charles Schumer said college is becoming a necessity, yet is increasingly unaffordable for many students.
And that situation could get worse if the interest rate on federally subsidized Stafford loans doubles from 3.4 percent to 6.8 percent, as it will unless Congress acts by July 1.
Schumer, D-N.Y., said a higher interest rate would hurt students’ ability to earn a good living, which in turn would harm the country as a whole. “Making education more expensive is biting the hand that feeds you,” he said Thursday at Union College’s Nott Memorial.
While the interest rate on existing loans won’t change, any debt taken on after July 1 will be subject to the 6.8 percent figure if legislation isn’t passed, according to Schumer.
“That’s an outrage,” he said, noting that the interest rate for mortgages is considerably lower than 6.8 percent. The change may mean that more students will not be able to afford the college of their choice or will forego college altogether.
“Those who do go will pay a lot more interest and have a lot higher debt payments hanging over their head when they get out of college,” he said.
College costs have being going up faster than the rate of inflation for many years, according to Schumer, and the average annual cost is now $17,000 at public schools and $37,000 at private schools. “Student loan debt is like quicksand. It swallows you up before you can gain your footing,” he said.
In 2007, Congress lowered the rate because interest rates were on the decline, Schumer said. Now that legislation is expiring. Without the extension, the average cost of going to college for New York students would increase by $3,800 over a 10-year repayment plan, according to a news release from the senator’s office.
Schumer hopes that a bill introduced by Sen. Jack Reed, D-R.I., will be brought to the floor. In addition, Schumer expressed a desire that a lower rate be made permanent. He acknowledged that the lower rate will cost the federal government more money, as much as $6 billion a year by some estimates.
Schumer hoped for bipartisan support. “One place there’s consensus in America is we ought to be encouraging deserving students to go to college,” he said.
Schumer also showed his support for Union’s men’s hockey team, which competed in the Frozen Four later that day. He held up a sweatshirt with the college logo and praised the fact that the team accomplished this feat without any athletic scholarships.
“Go Dutchmen!” he cheered
Union freshman Catherine Kennedy of Niskayuna, who has taken out Stafford loans, estimated that she will have about $25,000 to repay when she graduates.
Kennedy, who is studying bioengineering and wants to go to medical school to become a surgeon, said it is kind of scary that the interest rate could double. Cost is definitely a consideration in students’ choice of college.
“A lot of my friends didn’t go to the schools they got accepted into or wanted to go to,” she said.
Sophomore Richard Harris of Little Falls, who is majoring in economics and wants to become financial adviser, said the loans are building up to such a point where they could take decades to pay off.
“What is the incentive to go to college that costs a huge amount?” he said.
Matt Malatesta, Union’s vice president for admissions, financial aid and enrollment, said the average student at the college receives about $30,000 in financial assistance. The college’s annual financial aid budget is about $30 million. Union’s comprehensive fee including cost of tuition and room and board for the 2012-13 year is $56,000.
“Our commitment is to meet the full financial aid of students we accept,” he said.