ANDERSON, Ind. — There could still be a retroactive fix if Congress acts after the July 4 holiday, but as they stand now, subsidized Stafford loan interest rates are set to double in the fall.
The interest rate on the student loans, accounting for roughly a quarter of all direct federal borrowing, went from 3.4 percent to 6.8 percent Monday with inaction from Congress.
The thought of more debt is a frustrating one for students like Dylan Snell, who'll be taking classes at Ivy Tech Community College in the fall.
Even though Snell, a 2013 graduate of the Anderson Excel Center, will have grants to pay for a significant part of his schooling, he said he's still discouraged by the rate increase.
"If you want to be educated, you should have the opportunity to do so and not be in debt for the rest of your life," he said, adding that one needs a degree beyond high school to be successful in today's economy.
Snell has friends struggling to repay student loans and knows an Anderson University graduate nearly 30 years old who has only paid off half his debt.
Snell said he's already earned college credit for no cost at the Excel Center, but he added that he wants to live comfortably and not worry about stretching his finances to make it day to day.
With the interest rate increase, Congress' Joint Economic Committee estimated the cost passed on to students would be about $2,600 with a four-year degree. The average debt of a four-year college graduate in the United States is already about $26,600, according to the Project on Student Debt.
Student debt has risen significantly to about $1 trillion today, surpassing credit card debt nationwide.
"Awareness is key," said Tammy Tomfohrde, director of financial aid for Ivy Tech's East Central Region.
To help students prepare for the potential increase in interest rates, she said Ivy Tech has been focusing on financial literacy, scholarship and grant education, and limiting borrowing whenever possible.
Ivy Tech is acting as an experimental site by reducing the available unsubsidized loan amount by $2,000. Tomfohrde said most qualify as independent students and will only be allowed to take out a maximum of $8,500 in unsubsidized loans —- loans that already have a 6.8 percent interest rate — and begin building interest while students are still in school, unlike the subsidized loans.
She added that officials are being more proactive by showing students what they already have in grants and scholarships, encouraging them to decline loans if they can get by without them.
"The big thing is need versus want," said Corey Sharp, director of Anderson's Purdue University College of Technology.
It can be difficult to resist money that's readily available, he said, but students really should only take out money they absolutely need to get through college.
He said Purdue officials encourage students to look for alternative forms of financial support and help them search for more scholarships. Financial literacy programs are crucial, he added.
Students are definitely aware of the rate increase, Tomfohrde said, as she's seen more of them come in to ask questions in the last six months. About 70 percent of Ivy Tech's East Central Region students have some form of financial aid, she added.
If Congress again fails to take action next week, the rate will actually return to the 6.8 percent interest students paid before Democrats took control of both the House and Senate in 2007, when Congress voted to lower the interest rates gradually to 3.4 percent.
According to Communications Director Elizabeth Shappell, Indiana's Democratic U.S. Senator Joe Donnelly is one of those working "on both sides of the aisle to find a way to keep rates low for students and to work on college affordability, because Hoosiers should not be burdened with unmanageable debt in order to obtain a college degree."
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