College Students suffering financially
Concerns mount over higher rates on student loans
The Republican-led Congress and President Bush are facing growing anger on college campuses as students and their parents prepare to pay higher borrowing costs because of new changes to federal student loan programs.
Congress narrowly passed a deficit-reduction bill last month that cut $12 billion from student loan programs, which was signed by the president. The new law will slash subsidies to lenders and raise interest rates on loans taken out by parents.
Lawmakers already had approved a steep increase in interest rates for Stafford loans, used by nearly 10 million students each year. Both rate increases take effect July 1.
And the situation gets worse for post college graduates, as graduating students suffocate under tens of thousands in loans.
Tom Dillon, 19, a pre-pharmacy major at the University of Connecticut, is carrying $52,000 in student loans. And he's just getting started. When he gets his pharmacy doctorate in four years, he expects his debt to exceed $150,000. Dillon's been drawn to pharmacy since age 5, when he found out he had epilepsy.
And the cost of that debt is about to rise. On July 1, the rate on new federally guaranteed student loans will hit a fixed 6.8%, the highest rate since 2001. It comes as the average graduate owes $19,000. Many undergrads, though, have debt exceeding $40,000.
Those higher payments carry huge implications for this generation of college graduates. The weight of debt is forcing many to put off saving for retirement, getting married, buying homes and putting aside money for their own children's educations.
Heavy student debts may also keep young adults from starting businesses, says Diana Cantor, director of the Virginia College Savings Plan. Some graduates will refuse to risk what little money they have on entrepreneurial ventures. And securing loans will now be harder. "It's a real crisis," Cantor says. "You're strapped before you get started."
But don't count on Sailer or the Republicans to address these issues. The Republicans are eager to cut a few billion dollars in college financial aid, but they go out of their way to pour many more billions of dollars into the war in Iraq.