Higher education already is financially out of reach for far too many American students, and a measure scheduled to take effect on Monday will make that situation much worse.
Unless the U.S. Congress acts before Monday, the interest rate for new federally subsidized student loans will double from 3.4 percent to 6.8 percent, the same as unsubsidized loans. The increased rate will have a devastating effect on college students across the country including those at Kansas University. About 8,000 KU undergraduates took out federal student loans for the last school year. Graduate students no longer are eligible for subsidized loans and already are paying the higher rate.
Interest on student loans doesn’t start to accumulate until after a student leaves school — hopefully with a degree. According to estimates from a congressional committee, the doubled interest rate would mean that the average student would pay about $2,600 more if he or she repaid the loan in 10 years.
Student loan debt has become a crippling obstacle for many students. A report completed by the College Board last year showed that 57 percent of students who earned bachelor’s degrees from public four-year colleges in 2010-11 graduated with debt that averaged $23,800. Especially in the current job market, that’s a pretty big hole for many new college graduates to dig themselves out of.
It’s probably enough to make many potential students think twice before going into debt to finance a college education, and that’s too bad. Higher education is a good investment in the future both of individual students and of the nation as a whole. Students should be rewarded for making that investment, not punished with higher interest rates.
It’s possible right now to find a 15-year mortgage loan with an interest rate below 4 percent or take out a loan to buy a car for under 3 percent. A student loan doesn’t carry the same kind of collateral as those loans, but isn’t investing in higher education as important, or even more important, than buying a house or car?
It’s already hard for most U.S. students to pursue higher education without incurring debt they may struggle to repay later. Congress should act quickly to ward off the increased federal loan interest rate and the additional burden it would place on students who are trying to invest in their future.