Student loan interest rate could double, making higher ed tough for some
MURRAY, Ky. — You can almost feel it on campus: stress. It's hanging in the air as students wind down the spring semester, rushing off to their final study sessions.
Adam Winn is worried about the grades and coming up with the money to pay for it all.
"It's difficult," the sophomore said. "It's hard just to do well in all your classes when you're working almost every single night during the week. It's a lot to get done."
In fact, he is working two jobs to help pay for school.
"I'm doing all I can right now."
But it could soon get a littler tougher. Next fall, the interest rate on student loans could double from 3.4 percent to 6.8 percent.
Back in 2007, the College Cost Reduction and Access Act went into effect, reducing the loan rate to 3.4 percent.
Now, President Obama is pushing to extend that low interest rate on federal student loans. He traveled Tuesday to the University of North Carolina at Chapel Hill and the University at Bolder to hammer the issue.
But the Congressional Budget Office estimates the lower rate would cost $6 billion if Congress decides to extend it just for one year.
As things stand now, with no intervention from Washington, the federal student loan rate will double July 1 to 6.8 percent.
At Murray State, 65 percent of students received federal loans last year. Lori Mitchum, the Director of the Office of Financial Aid, said without those loans, some students would be unable to attend.
"That's a lot," Winn said of the projected increase. "I know it will be a lot for my family to deal with."
But Jorge Bermudez does not have family to help. He is doing it all on his own. That's why he's working at the Financial Aid Office 20 to 25 hours a week.
"I knew I was going to have to do this but as it's getting closer and closer, I'm getting more and more nervous because of all this money I have to get back," he said.
He has just one more semester with the projected higher rate. He said he will swallow that cost to earn his degree.
So, too, will Adam Winn but he worries not everyone on the campus will.
"If it goes up, not everybody's going to be able to afford to go to school."
Lori Mitchum said there are other options for students, including alumni, foundation and community scholarships. But often those funds are not enough to cover the cost of their education.
Mitchum said for a lower rate, parents with good credit scores might even consider co-signing with their child for a private loan.
The loans in question are federal subsidized loans, which means students will not have to pay on those higher interest rates until six months after graduation.
But the rules could also be changing for graduate students. All loans will be unsubsidized for those students, which means as soon as they receive money, the loan will accrue interest.