Although lawmakers announced Tuesday they had reached a tentative agreement to prevent student loan interest rates from doubling this weekend, students can’t breathe easy just yet as a final measure still has to be passed.
Legislators are still in the midst of working out how to fund the $6 billion extension – which would go into effect July 1 – that would prevent rates from spiking from 3.4 to 6.8 percent for another year. But the news of a potential compromise comes just as more than 300,000 students prepare for reduced or lost Pell Grants, leaving many wondering whether they will be able to fund their education through graduation.
“It sends the message that you have to be rich to go to college, and just think if that were the case for all the highly qualified people who have given so much to our country,” Rep. Dutch Ruppersberger (D-Md.) said, adding higher education isn’t something the United States can cut funding toward.
The Senate agreed on funding the extension by reducing federal subsidies on loans and requiring companies to pay more for federal insurance on pension plans. But the changes in Pell Grants about to go into effect, which are expected to save $11 billion over 10 years, will eliminate 87 of the 5,550 undergraduate students from the program, according to Director of Student Financial Aid Sarah Bauder.
“A number of students are at the tipping point,” Bauder said, adding that many more may see reduced loans. “I’m not going to know the total impact until next year.”
Sophomore government and politics major Charmaine Wilson-Jones said she thinks several students are caught in the middle of election-year tensions.
“It was pretty unnerving,” Wilson-Jones said. “I just realized how much of it is controlled by partisan politics – it got very real and felt like they were just wanting to make each other look bad.”
Wilson-Jones said her biggest concern is what will happen going forward – she hopes to go to law school, an ambition that may not be possible if she can’t access affordable loans.
University System of Maryland Chancellor Brit Kirwan said while it’s relieving interest rates will likely remain at their current rate next year, legislators need to find more efficient ways to help students finance their education.
“It’s a mixed message,” Kirwan said. “There is the very positive continuation of low Stafford loan interest rates, but looking out across to the future, I am very, very troubled by the inability of Congress to provide better loan circumstances for both undergraduates and graduates.”
University officials worry that without adequate aid options available, minority students may be dissuaded from attending the university. Chief Diversity Officer Kumea Shorter-Gooden said Pell Grants and financial aid are “absolutely critical for students from underrepresented groups.”
Even students who may be able to rely on low interest rates aren’t out of the clear. The potential compromise to keep loan interest rates at 3.4 percent comes with a trade-off: Repayments must begin with graduation, rather than allowing students a six-month grace period to find employment. Additionally, graduate students will no longer be eligible for subsidized loans starting this fall.
Even if passed, the proposed solution will only freeze the interest rates for one year, and that, business teaching fellow Cliff Rossi said, is the agreement’s fatal flaw.
“By declaring they’ve come to an agreement, they’ve basically agreed to postpone the decision,” Rossi said. “We’ll be right back at this again in another year … it’s no solution in my mind.”
Earlier this month, system officials met with Vice President Joe Biden to discuss a commitment to educating students about financial aid options and keeping higher education affordable.
That vision may be fading, however, as federal constraints will make it harder for students to manage loans, even with the right education.
“I think I always understood that there were a lot of risks associated with taking the loans out,” said Rachel Pacella, a senior journalism major who uses federal loans to pay for her housing.
“I’m still cautious, but I think finding a way to finance education is one of the biggest challenges for people my age,” she added.
Kirwan said those who will be most affected in the system will be graduate students. Graduate degrees are becoming increasingly essential in the working world and he worries that students won’t be willing to pursue the degrees that some professions require because they can’t afford it.
“I’m very worried about what will happen a year from now,” Kirwan said.
akinnibi@umdbk.com, blasey@umdbk.com
