Loan Rate Increase Sparks Concerns
Published: Thursday, May 17, 2012
Updated: Thursday, May 17, 2012 20:05
The looming expiration of the interest rate for Stafford loans on July 1 has university administrators and student representatives concerned.
Stafford loans, which comprise subsidized and unsubsidized student loans granted by the federal government, carried interest rates as low as 3.4 percent in the past academic year for subsidized loans, while private-loan interest rates range into the double digits.
If the current low interest rates expire, the rate would increase to 6.8 percent, resulting in a mean increase in cost of $1,000 to the average Stafford loan awarded, according to Associate Vice President for Federal Relations Scott Fleming (SFS ’72).
The loans are a crucial resource for both undergraduate and graduate students. The Stafford loan program ensures that no payments are expected while the student is enrolled in school, with a grace period extending six months after the time of graduation.
Fleming expressed worry about the imminent change.
“In that the university is committed to its full-need financial aid policy — that policy is designed specifically to ensure that all qualified students are financially able to attend Georgetown — we are concerned when policy changes would add to the cost of financing a Georgetown education,” he said.
Due to the fact that 43 percent of undergraduates at Georgetown rely on direct loans to pay tuition, Georgetown University Student Association President Clara Gustafson (SFS ’13) is taking action to advocate an extension of the rate cut.
“[We] have been working with a large network of universities to ensure Congress acts to prevent this expiration,” Gustafson said.
Along with nearly 200 other student executives, Gustafson signed a May 1 petition to Congress.
“We need bold, bipartisan steps to address the systemic problems that are driving up the cost of college,” the letter said. “We hope action on extending the 3.4 percent Stafford loan interest rate is the first of many steps in a real effort to address the level of student debt and reduce the excessive need for borrowing.”
Gustafson stressed that the university must work to maintain its current level of dedication to college affordability, citing the average graduate debt of $12,500, just over half the nationwide average of $23,000.
“We have a long tradition of dedication to this issue. Georgetown was the first Catholic university to promise need-blind admittance,” she said.
While Gustafson was optimistic that Congress would take action to preserve the low interest rate by the July 1 deadline, she said her staff is working throughout the summer to fight against the increase.
“I am nearly certain Congress will address the issue by that point, given that this is a huge issue in working to solve the student debt problem in America,” she said. “A good amount of [the GUSA] staff is here [this summer], so we are remaining proactive in addressing this issue.”
Should the current interest rates expire, the university hopes to counteract the cost increase with its own fundraising for student financial aid.
“The university continues its efforts to increase Georgetown scholarship funding, including making funds for Georgetown scholarships a major focus of the ongoing capital campaign,” Fleming said.