Colleges Brace for Increase in Student Loan Rates
Reprinted from the Houston Chronicle
By: Renee C. Lee, Higher Education Reporter
WASHINGTON - Because of congressional inaction, interest rates on federally subsidized student loans doubled to 6.8 percent Monday, leaving thousands of Texas undergraduates facing more costly repayments.
The rates, however, may be reduced when Congress returns from the July 4 holiday. Lawmakers from both parties, as well as the White House, vowed to lower the rate before students start signing loan documents this fall, the Los Angeles Times reported.
The increase will only apply to those who choose to take out new loans for future semesters. Loans negotiated before Monday's deadline will remain at the 3.4 percent interest rate.
Pauline Abernathy, vice president of the Institute for College Access & Success, said 464,000 Texas students rely on subsidized loans.
With the new rates in place, schools across Texas have started to make extra efforts to cut costs for students.
Delisa Falks, executive director of scholarships and financial aid at Texas A&M University, said about 48 percent of undergraduates rely on subsidized loans. Faculty and staff are working on updating the A&M Facebook and Twitter pages to inform students regarding what they are doing to help cut costs.
Tom Melecki, student financial services director at the University of Texas at Austin, said UT is doing everything in its power to keep costs down for students.
According to Melecki, during the 2012-13 academic year, 13,393 UT Austin undergraduates - about a third - obtained federal direct subsidized loans at 3.4 percent. Collectively, those students racked up more than $55.37 million in subsidized loans in the last year. Since the 2008-09 school year, Texas residents attending UT Austin full-time have seen a $1,282 increase in tuition.
Students at the University of Houston rank No.7 in the nation for graduating with the least amount of debt, according to rankings released by U.S. News and World Report in 2012.
"We advise student to use loans as last resort to meet their educational expense and stress the importance of finishing your degree within four years or as soon as possible in order to reduce the necessity to borrow more funds," Sal Loria said, executive director of scholarships and financial aid at UH.
LaTasha Goudeau, director of financial aid at the University of Houston Downtown, said the university is using the student loan debate as opportunity to educate students about managing finances. The university has a financial aid outreach team that offers information on how to be good consumers, which includes analyzing the pros and cons of taking out students loans and finding other sources of financial aid.
UH student Cedric Bandoh said he believes the increase will hurt students, families and the economy.
"We have surpassed a trillion dollars in student loan debt, and I believe this is a huge threat to the stability of our economy," said Bandoh, president of the Student Government Association. "Congress needs to act soon and then immediately get into the discussion about coming up with a long-term plan for our federal student aid program. I would hope that things such as income-based repayment and refinancing of existing debt plans would be at the forefront of those discussions."