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UNM students, along with others nationwide, might face higher interest rates on federal student loans, as efforts in Congress to keep the rates at their current levels remain uncertain.
Federal student loans’ interest rates doubled to 6.8 percent from 3.4 percent at the beginning of this month because members of Congress were unable to reach a compromise by July 1.
But there were efforts in the Senate last week to extend student loans’ low interest rates made by Sen. Martin Heinrich (D-N.M.). Heinrich cosponsored a bill aimed at extending the previous rates for another year so Congress would have more time to come up with a long-term solution.
According to Heinrich’s office, the bill would have been fully paid for by closing a loophole in the tax code that allows tax-deferred retirement accounts.
But on July 10, the bill failed in the Senate by a vote of 51-49. The bill needed 60 votes for it to advance.
Heinrich said he was disappointed with the result, and slammed Republicans for backing a proposal that could potentially put rates at 8.5 percent.
“Investment in education improves job opportunities, increases lifetime earnings, and is essential to our nation’s economic competitiveness,” he said. “Unfortunately, Republicans are instead pushing a proposal that fails to lock in low rates. Their plan would reset interest rates each year, even as they rise — a move that could cause student loan rates to more than double over the next 10 years, burdening students and families with more debt.”
The House of Representatives’ plan aims to solve the long-term problems of student loans using a different method. The House bill would potentially raise the rates to 8.5 percent, a figure that becomes possible because the bill ties the interest rates to market rates and adds an additional 2.5 percent on top of that figure.
By calculations based on the House bill, the Congressional Budget Office projected that student loan rates would rise to 5 percent by 2014, and to 7.7 percent in 2023. Democrats in both the House and the Senate did not agree with this figure.
But on July 16, senators met with President Barack Obama, who urged them to make a decision to prevent a sudden spike in student loan interest rates. After receiving pressure from the U.S. Department of Education, senators reached a compromise on July 18. The deal would tie the interest rates to the 10-year Treasury rate, a move Republicans in the Congress highly endorsed.
The Senate is set to vote on the deal by the end of July.
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However, if the Senate strikes down the bill, the effects of Congress’ inaction will immediately take effect as students return to UNM this fall.
UNM student Bria Hartsfield said that if the rates were to double, paying for her education would be much more difficult. Now that those fears have been realized, she said she isn’t pleased with the inability of Congress to come together.
“It seems like they don’t even care about students,” she said. “It obviously wasn’t high on their priority list, because if they wanted to do something about it, they would have.”
Hartsfield said “the financial burdens of college were already hard enough, and this does nothing but add to that hardship. Now I will be in even more debt as a result, and it makes getting an education for students that much more difficult to attain.”
