UNM students may be faced with more financial woes than just the recent tuition hikes if Congress fails to act on the interest rates of student loans.
The current interest rate on student loans, which was set by Congress at 3.4 percent for a year during June 2012, is set to double to 6.8 percent on July 1 due to Congress’ inability to come up with a long-term solution before the expiration deadline.
Last week, the Republican-controlled House of Representatives passed legislation that aims to solve the long-term problems of the interest rates, but the legislation would potentially raise those rates to 8.5 percent over a number of years. That figure becomes possible because the bill ties the student loan interest rates to market rates, and adds an additional 2.5 percent on top of that figure.
Under the legislation’s calculations, the Congressional Budget Office projects that the rates on those student loans would rise to 5 percent by 2014, and 7.7 percent in 2023.
Any potential raise in interest rates has been met with fierce opposition from Senate Democrats, including Sen. Martin Heinrich (D-NM).
In a statement sent to The Daily Lobo, Heinrich said he urges Congress to keep student loan interest rates at their current levels.
“Congress must act to keep interest rates on student loans from doubling this summer,” he said. “We need to give students a fair shot at succeeding in a tough economy, not saddle them with debt.”
Heinrich is considering a piece of legislation in the Senate that would extend the current interest rate of 3.4 percent until 2015.
“Earning a college degree shouldn’t be a luxury, but (should be) something that every American family can afford,” he said. “I’ll always fight to strengthen the middle class and work to make higher education more accessible to all New Mexicans so that every student who wants a college education can get one.”
An extension of the current low interest rates would be welcome news to students at UNM, who recently have already had to retool their financial plans in the face of the tuition hike that is slated to begin in the fall of 2013.
“It’s disappointing because I have no other way to pay for my education except for student loans, and with the increase in tuition, it will just prompt me to take out even more student loans,” UNM student Bria Hartsfield said. “I kind of have to now because I’m not going to have a way to pay that so it will just put me further into debt, and I don’t really want to be paying it off for the rest of my life.”The new tuition hikes could cost up to an additional $1600 a year for undergraduate students, depending on the amount of credit hours students are enrolled in. The new rates call for an increase of $400 for students taking 15 credit hours or more per semester, while there is an $800 increase for those taking 12 credit hours or fewer per semester.
Hartsfield said the two increases would make it harder for many students to pay for school.
“I can imagine the financial burden that people would have if the interest rates doubled, because most of us can barely afford the latest tuition increase,” she said.
As it currently stands, interest rates on student loans are set to double on July 1 of this year unless Congress finds a solution. With the bill from the House being a political non-starter in the Senate, and also facing a veto threat from the White House, the future of student loans is uncertain.