Rates on loans to decrease

The House of Representatives voted Jan. 17 to cut interest rates in half on undergraduate… The House of Representatives voted Jan. 17 to cut interest rates in half on undergraduate subsidized Stafford loans by 2011.

The bill would gradually reduce interest rates on loans taken out after July 1, 2007, from 6.8 percent to 6.12 percent, and would gradually decrease rates every year to 3.4 percent by 2011.

This bill is one of the Democrats’ solutions to the problem of rising tuition rates in colleges across the United States, Mike Dinkel, press secretary for U.S. Rep. Mike Doyle, D-Pittsburgh, said.

The bill would not affect Perkins loans or loans taken out by students’ parents.

For the 2004-2005 school year, more than 5.5 million students nationwide took out federal subsidized loans – need-based loans backed by the federal government’s low interest rates until students graduate.

According to a publication by the U.S. Public Interest Research Group, the number of subsidized borrowers from Pennsylvania at 4-year institutions during the 2004-05 school year was 211,832, the fourth highest in the country.

David Hawkins, a spokesman for the National Association for College Admission Counseling, said that his organization fully supports the bill.

“Any additional funding for students is something that we’re willing to support,” he said. “We have been waiting for it for so long.”

In the past, the NACAC has conducted surveys that showed high school students’ growing concerns with applying for student loans. Hawkins said that almost 80 percent of students reported to their high school guidance counselors that loans “had an effect on [them] going to college,” especially students from families with middle and low incomes.

“Loans are OK,” Hawkins said, “but they have to be held in check.”

Over the past five years, interest rates on student loans have risen almost 2 percent, and the average student graduates from college with $17,500 of debt, according to a press release from Doyle’s office.

If this bill was to be approved by the Senate, Dinkel said that students could save $4,420 over the life of their loans.

The loans’ fixed interest rates would be set at 6.12 percent in 2007-08, 5.44 percent in 2008-09, 4.76 percent in 2009-10, 4.08 percent in 2010-11 and 3.4 percent in 2011.

Dinkel said that some of the opposition to the bill was made up primarily of members of the Republican party who claim that the resources would be better spent if allocated to other need-based financial aid programs like Pell Grants.

Dinkel explained that Republicans tend to ignore the fact that the Democrats will try to increase the maximum Pell Grant scholarship later in the year.

“You need a lot of different things [to help combat the increasing rates of tuition],” Dinkel said. “This is just one of them.”

During the last election, a major part of the Democrats’ platform was to make higher education more affordable for students.

“A Democratically controlled Congress will make a difference,” Dinkel said.