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News Clips 07/03/2013
Student loan interest rate hikes has First Coast college officials on edge
Source: Florida Times-Union, 07/03/13
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By Drew Dixon
The impact of the interest rate hike on federal student loans will be dramatic for First Coast college students, if the increase that more than doubled rates remains in place by the time students return to class this fall.
“It can have pretty serious implications,” said John Yancey, interim assistant vice president for enrollment services at the University of North Florida. “When you’re doubling that interest rate, even though it’s a relatively small rate to begin with, the impact is very significant.”
As of Monday, the interest rate on federally subsidized Stafford loans for undergraduate students jumped from 3.4 percent to 6.8 percent because of congressional gridlock on settling the federal rate. That increase could cost students as much as $2,600 more in accrued interest for each student loan they obtain, according to an Associated Press report.
The rate increases will not impact any student loans already issued.
Yancey said more than 7,000 students each year out of the total student population of about 16,000 at UNF alone, where tuition costs about $5,000 per year, will be impacted. He said a majority of students on the Southside campus in Jacksonville get some sort of student loan before they graduate.
Yancey added the interest rate spike that was implemented Monday was the most substantial increase in student loan rates he’s seen in his 16 years of dealing with financial aid issues at UNF. He is doubtful that rate will remain in effect by the time classes resume for fall semester in August.
Yancey said for the moment, the impact may be nil because students don’t begin applying for student loans until just before fall session. He said his office has received few calls, but that may be because many students already are aware of the situation and it is the Fourth of July holiday week.
Members of U.S. Congress have vowed to return to Capitol Hill after the Fourth of July break to grapple with the student loan flap and return the interest rates to a lower level.
An effort to keep the interest rates down fell apart last week when negotiations in the U.S. Senate deteriorated.
First Coast Congressional representatives Corrine Brown, D-Fla., and Ander Crenshaw, R-Fla., predicted the higher rates will not stand. They also took shots at the opposing political party for the fix they find themselves in.
Crenshaw said the House of Representatives approved a bill in May that called for variable interest rates on student loans. But he said that was ignored by the Senate.
“Unfortunately, the Democrat-led United States Senate chose not to act on the House’s common-sense, budget-conscious approach, leaving students and their families with higher borrowing costs and economic uncertainty,” Crenshaw said in an email statement Tuesday. “President Obama and Senate Democrat leaders need to get on the same page as the House to make college more affordable.”
Brown was equally critical toward Republicans.
“It’s well past time for Republicans to work with Democrats to ensure the success of America by ensuring the success and education of our nation’s students,” Brown said. “Their [Republicans] refusal to take action to prevent the doubling of the student loan interest rate before July 1st undermines our economy, weakens our middle class, and puts college out of reach for millions of students.”
Yancey said despite the political grandstanding, elected officials in Washington will reach a consensus to bring the student loan interest rates down because the economic realities of keeping the higher rates would adversely affect enrollment at colleges across the country.
“As students look around, they’re making choices on how to spend their hard-earned money. Education is an investment and if they feel that now’s not the time, they may put that off. So it could absolutely negatively impact enrollment,” Yancey said.