Congressional action is important, area college officials said, to prevent burdening many area college students with additional debt.
A deadline of June 30 had been set to keep the interest rates on federally subsidized Stafford loans from increasing from 3.4 percent to 6.8 percent. The loans are awarded to students based on financial need.
While Congress can revisit the issue after the July 4 holiday, it’s not certain if or when a deal will be reached. Congress faced the same situation last year, but passed a 1-year extension.
At Hartwick College, director of financial aid Melissa Allen said the potential increased rate represents a “universal problem,” not just for private colleges such as Hartwick, but for public institutions as well. She said the college is concerned about providing access for students to attend, and works with them to limit borrowing, as well as providing scholarships and loans of its own.
According to Allen, some of the college’s recent graduates may be paying back loans at the 6.8 percent rate right now. The Stafford loan rate had been at that level until the 2007-08 academic year, when it was reduced as part of the federal College Cost Reduction and Access Act. It continued to go down each year, reaching 3.4 percent in 2011-12.
Allen estimated that student debt at Hartwick is equivalent to about $3.9 million. Full-time tuition was $36,650 in 2012-13. The program allows students to borrow up to $3,500 the first year, $4,500 the second year and $5,500 the third and fourth year. Any rate increases would only impact new borrowers and not existing loans — meaning incoming freshmen will take the hit.
At the State University College of Agriculture and Technology at Cobleskill, spokeswoman Diane Dobry said nearly 65 percent of the college’s 2,500 students receive subsidized Stafford loans. Depending on the degree program, these students may borrow as much as $23,000 to graduate from SUNY Cobleskill, where full-time tuition for in-state students is $5,870 per year.
“If the rates double,” Dobry said, “it will create an additional hardship for students and families already struggling to finance an education.”
Dobry added that she doesn’t understand how this could take place when commercial interest rates remain relatively low.
At State University College of Technology at Delhi, director of financial aid Nancy Hughes said nearly two-thirds of the college’s 3,550 students received Stafford loans in 2012. Doubled interest rates would saddle those students with debt for even longer after graduation, she said.
Hughes noted that, for Delhi students, this is a particular hardship, as more than a third of them come from families with annual incomes of $30,000 or less.