Student Loan Rates May Double for Thousands of Rhode Islanders

Student Loan Rates May Double for Thousands of Rhode Islanders

Thousands of Rhode Islanders and 7 million students nationwide would see their student loan interest rates double if Congress and the Obama administration cannot reach an agreement to prevent the massive increase by July.

Now local leaders are saying the consequences of federal Stafford loan interest rates jumping from 3.4 percent to 6.8 percent could be devastating to students already struggling with the burden of paying significant student loan debt.

“Repaying student loans is part of being a responsible citizen, and I know that many of our students strive to do so,” Rhode Island College President Nancy Carriuolo said. “However, some alumni are either unemployed or under-employed in these difficult economic times. Now with the prospect of interest rates rising, it will be increasingly difficult for students to make their payments.”

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According to Senator Jack Reed’s office, such a marked hike could represent an estimated increase of $5,000 over a 10-year repayment period for those who rely on federal student loans. First and second year students would be hit the hardest by the rate increase.

Reed is sponsoring legislation that would prevent the rate hike and keep subsidized Stafford student loan interest rates at 3.4 percent. During a recent rally at the University of Rhode Island, he stressed the need to cap the current student loan interest rate and that more must be done to drive down college costs, to keep America’s educational system competitive.

“Keeping student loan interest rates low is an investment in both individuals and America’s global competitiveness,” Reed said. “As college costs continue to rise and more students take on loans to earn a degree, the Student Loan Affordability Act will provide relief for middle-class families saddled with student loans.”

Egan: Predictability in Rates Needed

Concern around the potential rate spike heightened Monday after an Associated Press analysis suggested that more than half of all recent college graduates are out of work. According to Dan Egan, President of the Association of Independent Colleges and Universities, doubling the interest rate on student loans would have a negative impact on the more than 40,000 students at colleges and universities who use Stafford loans annually in Rhode Island.

Egan said he hopes Congress can establish some predictability in student loan rates and warned that cuts to Pell grants are not the answer for keeping interest rates at 3.4 percent.

“As Congress wrestles with the negative impact of a doubling of the rate, it must also have a conversation around the predictability of student loan interest rates,” Egan said. “Establishing some predictability for students and their families, whether it be a floating rate and/or a ceiling on the interest rate, would provide students and their families a sense of the true cost of these loans over time. A thoughtful dialogue on predictability should be tied to this decision.”

Brown Applauds Reed

Brown University spokeswoman Darlene Trew Crist said the University supports Reed’s efforts to extend the 3.4 percent interest rates.

Crist noted that about 41 percent of Brown students graduate with “some debt" and said ‘keeping the Stafford Loan interest rate at a reasonable level is vitally important to these students and their families.”

“Financing a college education has long been a partnership between families, institutions and federal and state governments,” she said. “Since President Simmons arrival at Brown more than a decade ago, the University has made expanding financial aid and reducing the student indebtedness a priority by ensuring that a Brown education is accessible to all admitted students, regardless of family income.”