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Student interest rates face impending changes, Congress offers proposals



Each day brings finals week one step closer and, as the end of the year nears, deadlines are the top thought on students’ minds. On a national level, another deadline looms: On July 1, 2013, the interest rates for subsidized student loans are set to double from 3.4 to 6.8 percent.

With fewer than six weeks left until the end of the last bipartisan compromise, which lowered subsidized rates to 3.4 percent in 2011 and extended that rate through 2012, Congress is scrambling to establish yet another plan to mediate the costs of higher education for the foreseeable future.

Proposals from the Democratic side of the table include implementing an annual revision of interest rates based on the costs of covering student loan programs, as well as lowering interest rates to match that which the Federal Reserve charges big banks. The first, the Responsible Student Loan Solutions Act, would lower the rates according to charges determined by the Secretary of Education; S.897 is the second proposal, which would change the interest rate on loans to 0.75 percent for one year starting on July 1.

Republican leaders in the House of Representatives have recommended HR 1911, or the Smarter Solutions for Students Act, which would move all student loans to be set according to a market-based rate, changing yearly to reflect government debt in the form of a 10-year treasury note, setting caps for student rates at 8.5 percent. Because this bill reflects market rates, there’s also a chance that loans could decrease — however, there’s equal potential for an increase.

In light of proposals on both ends of the spectrum, economics professor Timothy Duy says that whether or not loan rates rise or fall is a question of where higher education sits on the government’s priority spending list.

“It’s relatively straightforward to figure out interest rates that are close to the government’s cost to capital,” he said. “The question then would be, should the federal government push interest rates even lower than that to subsidize the cost of higher education?”

Director of Financial Aid and Scholarships Jim Brooks, doesn’t expect to see a change in the number of students accepting federal loans, regardless of fluctuation in interest rates. Students, he believes, will continue to do whatever it takes to finance their education.

“If the student loan interest rates increase for subsidized loans on July 1, 2013,” he said, “I do not expect it to impact student loan borrowing. Students will use available resources to help with the cost of their education, and I expect that student loans will continue to be one of those resources.”

UO student Rosalyn Harvey, is one of the students for whom loans are a survival necessity. She is depending on both subsidized and unsubsidized loans to help pay the cost of living and tuition while she focuses on her education.

“If I didn’t have loans, I don’t know what I  would do,” she said. “They pay for tuition, help with rent and sometimes food. Whatever they decide to do, students are just going to have to deal with it … I don’t see another alternative.”

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Sami Edge

Sami Edge

Sami is the Editor In Chief of The Emerald. Former intern at Willamette Week and aspiring international investigative reporter. Swimmer, writer, dreamer, reader, thinker, explorer and drinker of strong coffee.