To the Times of Ti:
It is almost July 1, when the dreaded interest rate increase on subsidized student loans goes from 3.4 percent to 6.8 percent. The maximum amount of subsidized money possible for four years is $19,000. Interest accrued throughout the college years is paid by the government. Unsubsidized loans accrue interest at 6.8 percent, but they are limited to $2,000 per year (assuming dependence upon parents), and students are responsible for paying that interest. Students with subsidized and unsubsidized loans may potentially generate a four-year graduation bill of $28,500, with 67 percent of their debt currently at a rate of 3.4 percent.
If subsidized interest rates double on July 1, the government spending on interest payments to each of the subsidized student loans will go from $1,496 to $2,992 over the course of four years. According to USA Today (June 18, 2013), “an estimated 7 million students so far this year” have Stafford subsidized student loans. If a quarter of those students are freshmen, the government will have to pay $208,250,000 at 3.4 percent, and $416,500,000 if the rate doubles to 6.8 percent, to cover the interest for just their first year of college.
Raising the interest rate on subsidized student loans will cost new recipients more once they leave school (and hopefully enter the workplace), but will cost the government (taxpayers) hundreds of millions of dollars immediately. Where is that money coming from? Will that increased government spending increase the money available for loans for students? We need information, not scare tactics.
Bridget M.M. Simpson, Mineville