By July 1, interest rates on federal student loans could double, meaning students who take out new Federal Direct Stafford Loans will end up accruing interest at a 6.8 percent rate rather than the current 3.4 percent rate.
Congress is debating whether to pass a new bill that would extend the 3.4 percent rate indefinitely.
U.S. Rep. Barney Frank said he supports the bill, adding that an interest rate hike would come as a blow to middle- and working-class Americans.
“We’re underfunding [education]. We’re making a mistake,” he said. “We’re denying working people the chance to go to college.”
He said the debate has become divided along party lines, with many Democrats advocating for the bill’s passage and many Republicans claiming that keeping the deflated interest rate in place would put too much of an economic burden on the federal government.
Putting a freeze on the Federal Direct Stafford Loan interest rate for one year would cost the government about $6 billion, according to the Congressional Budget Office.
However, Frank said the government could make up for that added cost.
“We could tax millionaires . . . cut back on military spending and excessive weaponry,” he said, adding that for this bill, “we don’t have to compromise.”
The bill’s 126 co-sponsors are all Democrats, and while several Republican representatives have spoken out against keeping the low interest rates, such Republicans as Mitt Romney and Massachusetts Sen. Scott Brown have recently said they are in favor of the extension.
“I support extending the current interest rates,” Brown said in an emailed statement, “especially given the dreadful economy and the news that half of today’s college graduates either don’t have a job or are working in jobs beneath their skill level.”
Despite the Republican majority in the House, the bill still has a high chance of passing, said U.S. Rep. John Olver, one of the five Massachusetts congressmen co-sponsoring the bill.
“Even Republicans agree that interest rates on student loans should not be allowed to rise,” he said in an emailed statement. “The momentum is building and I think that we will get there. . . . At the very least it deserves to be brought to the floor for a vote.”
The debate has gained national attention, with President Barack Obama calling for Congress to prevent a spike in student loan interest rates in one of his weekly addresses.
He called attention to the bill during an address at the University of North Carolina of Chapel Hill, the University of Colorado at Boulder and the University of Iowa earlier this week.
This drive to keep interest rates low should be treated with urgency, Olver said.
“We ought to be helping [students] become all that they can be, not burying them in a lifetime of debt,” he said. “Given the high unemployment rate among young people and the incredible debt burden many are already struggling to work off, the prospect of adding on an extra $1,000 a year in repayment costs seems callous and absurd.”
Boston University students said a doubled interest rate for the loans could prevent some kids from going to college and put undue financial burdens on students who do graduate.
The current system “is already killing me with my loans,” said Sargent College of Health and Rehabilitation Sciences junior Cathy Baeza.
“We just have no extra money, no extra means of getting it,” she said. “It’s kind of ridiculous that they want to double it.”
If rates double, she said, it would persuade young adults to not go to college.
The United States’ job climate is already intimidating, said School of Education freshman Aurora Case.
“I’m already terrified of what I’m going to do when I graduate,” she said. “There are few jobs; there are few ways to pay off the student loans anyway.”
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