Student Loan Rates Set to Double on Monday – WHY IS NO ONE ELSE FREAKING OUT?

Apologies for not posting a crochet pattern yesterday – I couldn’t find my orange yarn to finish the one I have planned, but that just means it’ll be extra ready for next Thursday.

However, crocheting isn’t what I’m writing about today. I’m writing about how absolutely broke I am going to be for the rest of forever, but that isn’t exactly news so moving on…

On July 1st (hey, that’s THIS COMING MONDAY), federal student loans interest rates will double from 3.4% to 6.8% due to the inability of Republicans and Democrats to come to a compromise. Just for an idea for as to how high (slash unfair) this is, that is nine times the rate set for big banks to borrow money from the Fed. Elizabeth Warren has proposed a bill, the Bank on Student Loans Fairness Act, would set the student loans interest rate at the same rate as big banks, 0.75%.

Considering students are not corporations or rich donors, the likelihood of this passing is low. Republicans and private colleges won’t be profitting obscenely off of these rates, so I’m not optimistic. Lawmakers say a deal is still possible after the July 4 recess. But if they don’t agree on a plan soon, 7 million students expected to take out new Stafford loans could be stuck with a much bigger bill when they start paying the money back. Even if they do come to a compromise, it still won’t be before the rates double on Monday.

Admittedly, this is only for new loans that are taken out, which technically means I’d be safe. However, this also means that a significant chunk of my peer group would seriously reconsider graduate school – in many ways, more essential to finding a job in this economic market. A lot of positions expect a master’s degree for an entry level position.

Student loans in particular are difficult. Their saving grace is that they generally have a lower interest rate than a private loan, and subsidized loans don’t accrue interest while you’re in school. You also have a six month grace period once you are out of school. However, with those ‘perks’ come some serious problems. Thanks to Republicans, you cannot bankrupt your student loans, nor can you refinance them. You have to pay back student loans, even if you never finish your education. They also don’t consider student loans as ‘debt’ when applying for medical assitance.

Before 1976, all education loans were dischargeable in bankruptcy. That year, the bankruptcy code was altered so loans made by the government or a non-profit college or university could not be discharged during the first five years of repayment. They could, however, be discharged if they had been in repayment for five years or if the borrower experienced “undue hardship.” Then, the Bankruptcy Amendments and Federal Judgeship Act of 1984 made it so all private student loans were excepted from discharge too.

The price of education has risen exponentially since the 1970s, and while there are scholarships, pell grants, and other financial aid, it still doesn’t cover everything needed. Often times, the parents can’t help or won’t help either. Students in debt today with $10,000, $20,000 or even over $100,000 will be paying off student loans for the rest of their lives. Federal and private student loan debt surpassed credit card debt for the first time in 2010 and hit over $1 trillion. Student debt is higher than it has ever been and with this increase in the interest rate, it’s only going to get worse. And for what? A bachelor’s degree today seems to hardly say anything in the job market. It is expected that you have one.

Why would Congress want to screw over a generation that is in the process of (trying to) get into the work force and become productive members of society who will vote? That is going to end up screwing them over as well.

I’m not particularly optimistic about Elizabeth Warren’s bill passing, but if you want to do something, you can call your senator and see if he or she supports Elizabeth Warren (or at least voice your opinion and ask them to)!

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2 thoughts on “Student Loan Rates Set to Double on Monday – WHY IS NO ONE ELSE FREAKING OUT?

  1. Anne says:

    The Graduate Direct PLUS loans already have an interest rate of 7.9% that won’t be changing on July 1, but just keep in mind Graduate school student loans are already higher than the ones you’re talking about

  2. Is 0.75% for students really fair? I assume big banks get those rates because they were very stable. Individual students aren’t.

    I need to read up on what the other side thinks and why. There’s got to be a balance between encouraging education while not discouraging loans because of risk.

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