FOR IMMEDIATE RELEASE: April 25, 2012
SCHUMER: STUDENT LOAN INTEREST RATES FOR HUNDREDS OF THOUSANDS OF STUDENTS IN UPSTATE NY SET TO DOUBLE FROM 3.4% TO 6.8% THIS SUMMER UNLESS CONGRESS INTERVENES – SENATOR PUSHES LEGISLATION TO BLOCK RATE HIKE AND KEEP COLLEGE TUITION AFFORDABLE
Today, U.S. Senator Charles E. Schumer announced his push for legislation to stave off an interest rate increases for student loans that could raise the cost of attending college for hundreds of thousands of college students throughout Upstate New York. On July 1st, the interest rates on federally-subsidized Stafford loans will double from 3.4% to 6.8% unless Congress takes action to block the rate increase that could add thousands of dollars in interest payments to the cost of attending college. In 2007, Congress lowered the rate on federally-subsidized Stafford loans – currently held by 8 million undergraduates nationally and over half a million students in New York. But without an extension of the reduced rate, interest rates will double for students receiving these loans, driving up the cost of going to college for New York students as much as an additional $3,800 over a ten-year repayment period. Schumer today announced his support for legislation that would extend the 3.4% rate for one year, and urged Congress to take up legislation to make the extension permanent.
“The prospect of raising student loan interest rates is like nails on a chalkboard for New York’s college students,” said Schumer. “College tuition has skyrocketed at universities and colleges across the country, placing a huge burden on middle class families. As the economy is just starting to turn the corner, we need to do everything in our power to keep a high-quality education in New York as affordable as possible for families and students. Federal student loans are critical to helping students meet the rising cost of college and keeping their interest rates low is a no-brainer. With the July 1 deadline for a rate hike looming, Congress must act to extend these low-interest rates to keep the dream of going to college alive for hundreds of thousands of students in New York.”
The current fixed interest rate on federal-subsidized Stafford loans is 3.4 percent. Stafford loans are offered on the full faith and credit of the United States government and as such, are offered at a lower interest rate than they would be privately. To receive Stafford Loans, students must meet rigorous need requirements. Loans are not expected to be paid back while the student is enrolled in college or for a six-month after graduation. The federal government assumes the cost of loans’ interest for the period that the student is in college, unlike unsubsidized Stafford loans.
Schumer today called for passage of S. 2343, the Stop the Student Loan Interest Rate Hike Act of 2012, which would extend the reduced interest rate for Federal Direct Stafford Loans. The bill, similar to another bill introduced by Senator Jack Reed of Rhode Island, would extend the 3.4% interest rate for one year – which could mean thousands of dollars in savings for New York students and students across the country that rely on the loan program. Extending the low interest loans for one year would be paid for by closing loopholes that certain professional services businesses use to underpay employment taxes.
The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly subsidized Stafford loans for undergraduate students to 3.4% over a set period of time; 6.0% in 2008-09, 5.6% in 2009-10, 4.5% in 2010-11 and 3.4% in 2011-12. However, the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase does not apply to loans that are currently in repayment or that have already been disbursed, but rather new loans that will be disbursed after July 1, 2012. In other words, students still attending school after July 1, 2012 that use federally-subsidized Stafford loans will pay higher rates on the new loans, adding to their already stacking debt.
According to the New York State Higher Education Services Corporation, the average student who receives four years of subsidized Stafford loans would end up paying up to $3,798 more over the course of a ten-year repayment term if the interest rate is allowed to double this July 1st from 3.4% to 6.8%. This number is obtained by comparing the total amount of interest that a student would pay under either interest rate scenario, assuming that student had taken out the maximum amount of Stafford subsidized loans for four years of college and repays the loans over a 10-year period. Freshman are eligible for loans up to $3,500, sophomores are eligible for up to $4,500, and juniors and seniors may receive loans up to $5,500 for each of the last two years of college.
Hundreds of thousands of Upstate New York college students utilize federally-subsidized Stafford loans to help cover the costs of college. Here’s how they break down across the state:
· In the Capital Region, 40,784 students are currently receiving federally-subsidized Stafford loans
· In Western New York, 62,533 students are currently receiving federally-subsidized Stafford loans
· In the Rochester-Finger Lakes Region, 41,675 students are currently receiving federally-subsidized Stafford loans
· In the Southern Tier, 32,389 students are currently receiving federally-subsidized Stafford loans
· In Central New York, 41,797 students are currently receiving federally-subsidized Stafford loans
· In the Hudson Valley, 45,515 students are currently receiving federally-subsidized Stafford loans
· In the North Country, 18,225 students are currently receiving federally-subsidized Stafford loans