Local colleges talk federal student loan rate increase
The rates on many future student loans effectively doubled on July 1 when Congress failed to extend a reduced rate on subsidized loans.
While it is unclear whether that will remain the case at the start of the academic year, some area colleges are preparing how to respond if the reduced rate is not extended.
"It won't have any effect on College of DuPage students today, because students can't borrow until school starts," said Earl Dowling, COD's vice president of enrollment management and student affairs. "Congress will return from break and if – and this is the gamble – if they take it up, maybe students are okay."
Dowling said that the official word they have received from the government is to advise students to plan for the rate hike from 3.4 percent to 6.8 percent. While it won't change the loans already taken out for past school years, future students will face increased financial difficulties pursuing post-secondary education, he said.
"Say a student from a Wheaton high school is planning on going to college and using loans to pay for housing," he said. "If they were already having to try hard to make ends meet, now they will have to take that gamble. There's already a trillion dollars in student loan debt, the job market isn't favorable and, with that extra uncertainty, my concern is that families are going to decide to put off school."
Dowling said that about 5,300 COD students have borrowed under the Stafford subsidized loan program, in which the government pays student interest on the loans for as long as they are at least a half-time student. That's roughly $14.7 million in grant money, he said.
Wheaton College's Director of Financial Aid Karen Belling said that last year, half of the college's approximately 2,500 undergraduate students financed at least part of their education using the subsidized Stafford Loan program.
Belling said in a statement that Wheaton College graduates have a 1.4 percent default rate on their loans, compared to the national rate of 13.4 percent.
"Nonetheless, we are always concerned about changes that increase costs for our students, and will continue to monitor the discussion in Congress," she said.
Dowling expressed concern about COD students' financial future.
"There's a lot of frustration. Congress has had one full year to work on this and this is July," he said. "Families are going through orientation, making plans and then all of a sudden this happens. It's just unfortunate."