By Mitchell Culler
Collegian Staff Writer
Penn State Daily Collegian
Students relying on Federal Stafford loans could see their interest rate double if members of the U.S. Congress are unable to reach a decision by July 1.
The current interest rate on Stafford loans is 3.4 percent, but it is slated to double to 6.8 percent on Sunday unless Congress is able to send President Barack Obama a bill to sign before then.
Student loans are taken out year-by-year, said Anna Griswold, Penn State Assistant Vice President and Executive Director for Student Aid. For students, this means that loans already taken out will remain at a 3.4 percent interest rate, but students will be forced to pay 6.8 percent interest on future Stafford loans if Congress is unable to reach an agreement.
Congress reached an agreement on Wednesday which bundles the lower student loan rate with a bill to support spending on federal highways.
Congress is expected to pass Wednesday’s agreement sometime Friday, after running into hurdles that prevented them from passing it last night. The agreement, if passed, would keep the interest rate at 3.4 percent for one year, at which time the rate will need to be renegotiated.
“We’re pleased that the Senate has reached a deal to keep rates low and continue offering hard-working students a fair shot at an affordable education,” the White House press secretary said in a statement.
The rate hike would cost 7.4 million students an average of $1,000 each, according to the statement.
Though the legislation to keep the lower rate has received bipartisan support, the problem is in finding the money to support the lower rate, said Colin Holtz, who is the National Campaigns Director for Rebuild the Dream, an organization that has supported lower student loan rates.
Congressman Glenn “G.T.” Thompson, R-Pa., said, “It is absolutely essential that Congress put forward a long-term solution for college affordability, which meets the needs of student borrowers and the taxpayer alike,” according to an email from his communications director.
Obama has been touring the country to raise awareness and put pressure on Congress to act to keep the 3.4 percent rate.
“I think it was part of an effective strategy,” said Holtz. “Anytime the president of the United States walks into a town and starts calling attention to an issue, it’s incredibly helpful.”
Holtz also added that it is important to remember the efforts of students and parents who took the time to make phone calls and write letters.
“Right now, Americans hold one trillion dollars in student debt, predominantly held by the millennial generation, or young people under 30,” Holtz said.
Penn State students are no exception to this trend.
“In any given year about 50 percent of Penn State students are borrowing loans,” Griswold said. She said that virtually all of these students rely on the Stafford loans.
She also said that of the students graduating with debt in the 2010-11 class, the average student left with $33,533 in debt.
Students have varying kinds of loans, Griswold said. An unsubsidized loan accrues interest while the student is in school. A subsidized loan starts to accrue interest upon graduation.
Griswold said she thought it was unlikely that an increase in the student loan rate would greatly affect the number of applications that Penn State receives.
“At Penn State, the good news for our students is that we do a good job of graduating students and getting them into meaningful employment soon after graduation,” she said.
She added that it is important to recognize that the recent economic downturn has made it harder for students to find employment.
“The bottom line if the interest rate goes up is that it will simply cost students more to repay their loan,” Griswold said.
She said students who are taking out loans need to realize that they will have to pay them back in the future. It is important for these students to spend only on essentials to minimize the amount of debt they have upon graduation.
“We’re not asking Congress to make life incredibly better for college students,” Holtz said, referring to the “Don’t Double My Rate” campaign. “We’re not asking them to make college incredibly cheaper. We’re just asking them to not make it worse for students.”
The Associated Press contributed to this report.