Loan-rate changes may baffle students
With less than three weeks to go before federally subsidized student loan interest rates are set to double, Colorado Mesa University is prepared to tweak its loan counseling and information.
Colorado Mesa University Financial Aid Director Curt Martin said changes in loan interest rates are common. What’s uncommon is the current uncertainty about rates this close to the deadline for Stafford loan interest rates increasing from 3.4 percent to 6.8 percent. That change will occur July 1 if Congress does not act, but attempts to stop or delay the rate change are being mounted on both sides of the aisle.
“I don’t remember it getting down to the line like this before,” Martin said.
Stafford loan interest rates were at 6.8 percent when they changed to 3.4 percent in 2007. The rate was scheduled to return to 6.8 percent a year ago, but Congress postponed the increase.
If postponement doesn’t happen this year, Martin said Colorado Mesa and other U.S. colleges and universities will have to notify students about the rate change and tell them what it means for the expense of paying off college.
Martin said one of the biggest challenges will be explaining to students with existing loans, which will keep the current interest rate, that they may have loans with two separate rates if they take out a second loan on or after July 1.
“It becomes extremely confusing for students,” Martin said.
Martin said the university has already been trying in recent years to steer students away from taking out loans to pay for college by offering more institutional scholarship or work-study funding.
For those who do choose loans, Martin said the university recently looked back 11 years to discover reasons why about one in every 10 former CMU students default on their student loans. They found a leading reason was because students dropped out two years into school before they could earn a degree, so Colorado Mesa instituted more academic counseling for sophomores.
Colorado Sen. Mark Udall released a statement last week condemning the rate change, which will impact 154,128 Colorado undergraduate loan borrowers if the increase occurs. “A college education is the surest way for Coloradans to secure a high-quality job and build a successful future. But, even with the best education, high loan rates and debt can cripple a career before it even begins,” Udall said in the release. “Congress must prevent student loan rates from doubling in July to keep college education affordable and opportunity within reach for tens of thousands of Coloradans.”