Jake Geers, a sophomore at Ohio State, has aspirations of attending law school.
Now, the 2012 graduate of Lakota West doesn’t even know how he is going to pay for his undergrad schooling after a 2007 law that cut student loan rates expired Monday and caused rates on federally subsidized Stafford loans to double from 3.4 to 6.8 percent.
“Federal student loans don’t cover all my costs either. They aren’t nearly nearly enough,” Geers said. “Last semester I had to pay with cash (took fall semester off to work), but this semester I have no clue how I will pay for college. It honestly terrifies me.”
Last week, USA Today reported that negotiators claim that a deal is within sight and likely to be reached after Congress returns from the July 4 break. Sen. Joe Machin (D-W.Va.) was quoted saying that he thought it would “be resolved after (the break) and be retroactive.”
The lack of a deal is concerning for Geers, who says he has been reaching out to House Speaker and West Chester politician John Boehner for months about the issue.
“He won’t meet with constituents. He won’t talk to the people he is suppose to represent. He golfs with celebrities, fellow politicians, but won’t have a five-minute meeting with his people,” Geers said.
After initially being denied an appointment, Geers says that no one in Boehner’s scheduling office will respond to his emails.
“This is outrageous to anybody who wants to be represented in Congress, and the ‘pro small government’ politician doesn’t seem to think government should be small enough to actually have room for the common people,” Geers said.
What Geers hopes to discuss with his congressman is Sen. Elizabeth Warren (D-Mass.) proposal to reform the federal college loan program. Geers favors Warren’s plan, which would give students the same rate the government uses when it lends money to banks. That would put student loan interest rates at less than 1 percent, according to USA Today.
Boehner did release a statement at the end of last week, blaming Democrats in the Senate for failing to get a deal done before a weeklong break.
“Millions of American students and their families are about to pay the price for the stubbornness and partisanship of Senate Democratic leaders. It is stunning that Senate Democrats would leave town having done nothing to prevent interest rates on college loans from doubling. Earlier this year, the president called for a market-based interest rate for student loans. House Republicans responded by passing one. Senate Democrats responded with scorn and inaction. The inability of the president and leaders of his party in Congress to come together will now mean higher borrowing costs for students already coping with skyrocketing tuition bills. This Democratic infighting is exactly why we have to take politics out of student loans and put in place a permanent solution. The president must urge his fellow Democrats to pass a market-based solution as soon as they return so that we can right this wrong and give our kids a better shot at the American dream.”
Meanwhile, Sen. Tom Harkin (D-Iowa), the chairman of the Senate education panel, is pointing the finger back at Republicans and is urging Congress to maintain the current interest rate when it returns from recess.
“Rushing through a short-sighted, long-term proposal that will burden millions of future college students and their families with higher, unrestricted interest rates—and ask these same students to pay additional interest to reduce the deficit—is simply not right or fair,” Harkin said in a press release.
The Enquirer reported Saturday that the interest-rate doubling that would occurr on Monday could add $4,000 or $4,500 in payments over 10 years for a borrower entering college this fall. Below is a portion of that article:
The fight over Stafford loans only touches the surface of the crisis in student debt, which now tops $1 trillion, averaging nearly $27,000 for those who borrow to afford college.
Experts say student debt could imperil the health of universities and already is preventing graduates from buying homes and starting businesses, choking an economic recovery.
Even as Americans held overall consumer debt to a 9 percent increase from 2004 to this year, student debt tripled to $986 billion after adjusting for inflation, according to an Enquirer analysis of Federal Reserve Bank of New York data.
It’s now 8.8 percent of all consumer debt, up from 3.1 percent in 2004.
Congress gradually lowered the rates for subsidized Stafford loans starting in 2007 to 3.4 percent, but that legislation is set to expire. Lawmakers passed a one-year extension last year.
More students than ever are applying for federal loans.
About 31.4 million students applied in 2011-12, up from 19.4 million in 2007-08, according to the National Association of Student Financial Aid Administrators.
With subsidized Stafford loans, the government pays the interest that accumulates while the student is in college.
With unsubsidized loans, the borrower pays all of the interest.
President Barack Obama and members of both parties have offered alternatives, including linking the rate to U.S. Treasury notes or simply extending the lower rates for a few years.
Some call for fixed rates while other plans would allow interest rates to adjust with market rates.
U.S. Sen. Sherrod Brown, D-Ohio, said more than 360,000 students in Ohio alone rely on subsidized Stafford loans.
He has proposed allowing people paying off private loans to convert those to lower-cost direct federal loans.
“Why should our students and graduates be the last to benefit from historically low interest rates?” Brown said in a statement.
Congress could act after it returns from its July 4 recess to return rates on new student loans to their current level or make other changes to the program.
Senators left for the recess without acting on the loans. Democrats that control the chamber are divided on whether to freeze rates for a year (the way they were this past year) or increase them by linking them to interest rates in the financial markets. The bill increasing rates borrowed heavily from a version House Republicans passed earlier and from principles included in President Barack Obama’s budget proposal.
Some members of the president’s party have accused him of starting negotiations with too big a compromise. They think the government will make too much from the loans at higher rates, although those say the money is needed to cover losses from delinquent loans.
The law that governs college and universities expires this fall and lawmakers planned to rewrite it starting in September. Some Senate Democrats said they prefer to include a comprehensive student loan measure in it, rather than as a stand-alone bill.