New Hampshire students could be hit hard if federal loan interest rates double
New Hampshire college graduates could see significant increases to their student loan payments this summer, as interest rates on federally subsidized Stafford loans are scheduled to double.
Unless Congress intervenes, interest rates on new loans would increase from 3.4 percent to 6.8 percent on July 1.
Granite State graduates already bear the heaviest average debt burden in the country – an average debt of $31,048, according to The Project on Student Debt released in 2011.
The increased interest rates could make matters worse.
Tara Payne, vice president of college planning at the New Hampshire Higher Education Assistance Foundation, said the threat of a higher interest rate already has families questioning whether college is worth the investment.
“It’s disheartening,” Payne said.
Several parents have come forward and asked Payne if it’s even worth sending their children to college in this environment.
“One of their first questions is, ‘Is this a bad year for us to go? This seems like a bad year for us to go to college,’ ” she said. “That’s actually entering into their minds, and not because they have some goal to have a gap year.
“They recognize higher education is important but they’re terrified of the cost.”
The federal Stafford loans are popular, especially among low-and-middle-income students.
Over seven million students across the country, and nearly 38,000 in New Hampshire, currently have Stafford loans. Costs for students taking out new loans would increase by an average of $1,000 each over the life of the loans, according to the White House.
In New Hampshire, students can take out a maximum of $19,000 over four years in federally subsidized loans.
If the increase in interest rates takes effect, that $19,000 would turn into $26,238 over the typical 10-year repayment cycle – an increase of about 17 percent compared to what the loans would amount to at the current 3.4 percent interest rate, according to Payne.
She also said it another way, one that might hit home for students on a limited budget.
For 10 years, a student’s monthly loan payments would go up about 18 percent, from $187 to $219.
The issue of interest rates gained momentum on social networks, as well. The Twitter hashtag #DontDoubleMyRate was trending throughout the day Tuesday, as people around the country offered their opinions against the increases.
President Barack Obama toured several college campuses on Tuesday to talk about the rate increase, stopping in North Carolina, Colorado and Iowa. In one speech, Obama said he and first lady Michelle Obama only paid off their student loans eight years ago.
“Michelle and I, we’ve been in your shoes,” he told students at the University of North Carolina. “I didn’t just read about this. I didn’t just get some talking points about this. I didn’t just get a policy briefing on this. We didn’t come from wealthy families. When we graduated from college and law school, we had a mountain of debt. When we married, we got poor together.”
His likely opponent, Mitt Romney, also urged Congress to act soon and stop these increases.
“Given the bleak job prospects that young Americans coming out of college face today, I encourage Congress to temporarily extend the low rate,” Romney said in a statement.
Subsidized student loan interest rates were at 6.8 percent before Congressional Democrats passed cheaper rates in 2007. However, the same group also scheduled the rates to return to 6.8 percent before the 2012-13 school year.
The cost to the federal government to extend the lower interest rate of 3.4 percent is $5.8 billion, according to the nonpartisan Congressional Budget Office.
Payne said she worries about that impact as a taxpayer but was still happy to see bipartisan support in extending the lower rates.
“People generally know that higher education is going to be a path for a better life,” she said. “It’s good for the student personally and professionally but also for the taxpayer because that student is more likely to be civically engaged, pay taxes and be an active part in the workforce.
“I want to see the cost be as accessible as possible for students.”
Cameron Kittle can be reached at 594-6523 or firstname.lastname@example.org. Also, follow Kittle on Twitter (@Telegraph_CamK).