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What is happening with federal student loan interest rates?

Are they going up, or not?

by Manuel Castro

Federal student loans are a resource that has enabled millions of college students to pursue higher education; however, such loans may become burdensome due to a potential increase in interest rates.

On July 1, H.R. 1911, the Bipartisan Student Loan Certainty Act of 2013 was set to go into effect, causing student loan interest rates to double to 6.8 percent. The act could have been circumvented by a legislative action on the part of Congress, but Congress failed to meet the deadline to legislate a prevention.

On July 24, after much deliberation, the U.S. House of Representatives voted 392-31 in support of the House Republicans’ Smarter Solutions for Students Act, authored by Rep. Virginia Foxx (R-N.C.), a bipartisan deal to lower interest rates on millions of new federal student loans to 3.86 percent. This new result still translates to a 0.46 percent increase for student loan interest rates for millions of people across the nation, but not nearly as high as what could have come to light in the coming year.

Some college-affordability advocates have been critical of the strategy, saying it would cost students more in the long run than if rates were kept at current levels.

According to a statement from the Institute for College Access and Success, an nonprofit organization, “Instead of making student loans more affordable for both today’s students and tomorrow’s, this deal locks in long-term changes that provide short-term benefits for current students by increasing long-term costs for future students.”

Senator Elizabeth Warren (D-Mass.), has a few things to say on the topic of student loan interest rates. At a National Summit Conference hosted by the Center for American Progress's Generation Progress in Washington, D.C., on July 17, Warren stated, “Instead of helping our students, the government is making a profit on student loans. That is wrong. It is morally wrong. That is obscene.”

According to Warren, the federal government is due to reap $51 billion in profit this year from interest generated by new and existing federal student loans.

Linda Santos, a human services major in the college of Public and Community Service, offered her perspective on student loan rates. “[Loans] assist me in attending college. Without them I would be unable to attend college; I would not be able to go to school at all due to my fixed income.

“I feel as if I will be paying them off for the rest of my life! It places stress on me knowing that I not only have to pay back the money necessary that I needed to be loaned to afford a college education, but I also have to pay additional money due to interest rates. Sometimes when I think about it, or about their rising, it scares me when considering my future.”

Linda is involved in student organizations such as Domestic Leadership Exchange, which fights the social issues concerning hunger and homelessness, and she also works while going to school full time.