Interest rates on federal student loans double, community holds rally

Russell Edem | Collegian Bill Glover (center), president of the K-State chapter of the American Federation of Teachers, talks to Majorie Pfister (left), Manhattan resident, Pat Embers (right), Manhattan resident, and Donna Potts (far right), professor of English, at a rally to protest and raise awareness about the federal student loan interest rate increase in Triangle Park on June 27.

K-State graduate Chris Littrell believes student loans are becoming a major economic crisis. Littrell, who graduated in 2012, is one of millions of students impacted by the change in the federal subsidized Stafford loan interest rate, which doubled from 3.4 percent to 6.8 percent on July 1.

Littrell, currently a graduate student at Loyola University in Chicago, said
by the time he finishes his master’s degree, he will be $100,000 in
debt. He said the student loan interest rate
increase means he won’t have his loans plus interest paid off until he
is in his mid-40s.

As in 2012, Congress had the opportunity to extend the lower 3.4 percent interest rate on student loans before the July 1 deadline. Unlike last year, however, Congress recessed for the July 4 holiday before achieving a compromise, instead allowing the interest rate to double on Monday.

Last Thursday, still waiting for Congress to act, local community members, students and faculty held a rally in Triangle Park to raise awareness about the federal student loan interest rate increase.

“This event was the first of many different events to be used to distribute information and an informal protest,” said Bryan Pfeifer, organizing coordinator for the Kansas chapter of the American Federation of Teachers. “We are demanding that Congress act immediately to not pass this piece of legislation to increase federal student loan interest rates. We are opposing the higher tuition rates for all Kansas schools and many of the other cuts being made in colleges and universities state-wide.”

Federal Stafford loans are available to students at lower rates than private loans and can be subsidized or unsubsidized by the Department of Education. Subsidized Stafford loans are available only to undergraduate students with financial need — students whose cost of attendance exceeds the amount their families can contribute — and students are not required to pay interest on their loans until six months after college. Students are limited to borrowing only $3,500 in subsidized loans for their freshman year, $4,500 for their sophomore year and $5,500 for every following year. Students can receive up to $23,000 total in subsidized loans.

Prior to July 1, the interest rate on subsidized Stafford loans was fixed at 3.4 percent, but now the rate stands at 6.8 percent. It is unclear whether Congress will act to lower the interest rate after returning from their Fourth of July recess, before students begin securing new loans in August.

“We came out to show support for our students,” said Bill Glover, president of the K-State chapter of the American Federation of Teachers, at the rally on Thursday. “Students are being priced out of their education. If this student loan increase happens, it will put an immense amount of financial pressure on students. Many students who don’t have financial assistance from their parents or families will be unable to attend college because it will just be too expensive.”

The unsubsidized Stafford loan is not limited to low-income students, includes larger caps on borrowing and requires students to pay back the interest on their loan while attending college.

The federal government currently profits from student loans under regulations set by the Federal Credit Reform Act of 1990. According to a June 10 Congressional Budget Office report, the increase in the student loan interest rate will create an estimated $37 billion in savings for the federal government in 2013. Future savings are expected to fall to less than $10 billion a year from 2018 to 2023, generating a total of $184 billion from 2013 to 2023.

“Student debt is the modern-day indentured servitude,” said Donna Potts, professor of English. “Students currently going through school will be paying off their debts for the rest of their lives. It’s unconscionable that President [Kirk] Schulz received a $60,000 bonus — he now makes more than the President of the United States, yet students can’t afford to stay at this institution because it has become too expensive.”

Pat Embers, Manhattan resident, said she knows many students who are dealing with paying off student loans. She said she has been helping her daughter pay back her student loans and interest for some time now, and the interest rate increase could make the situation even worse for many families.

“There are too many unfair things happening in the United States politically,” Embers said. “There are so many big businesses and bankers who take out loans and pay minimal interest on them. Yet, we continue to charge our students more and more on the loans they are taking out for higher education.”

According to an April 18 New York Times article, the federal government makes a profit of 36 cents on every dollar it lends to students.

“We are at the tipping point,” said Steve Pfister, Manhattan resident. “We’re old; we’ve been the hippies. But, people can see at a certain point where there is a large ball of vitality it is bound to and will eventually explode. Just hope that no one gets hurt. And right now, that is what is happening with the federal student loan and the federal student loan interest rate.”