The interest rate for Stafford federal loans — which are geared toward low-income students and parents — has doubled this week due to congressional inaction.
And that news is hitting local students hard.
For Sierra College student Christine M., the increase will mean debt added to an already difficult financial situation.
Christine is a full-time student and mother of a teenage boy. She also is a welfare recipient with only $400 a month to survive on after bills are paid.
“Regardless of the interest rate, I’m still going to be taking out students loans because I have to be able to finish, even if that means I’ll be more in debt,” said Christine, who plans to pursue a career in elementary education and will transfer to California State University, Chico in the fall, which will require even more loans.
“With one of the elementary education programs, I can have my loans expunged, so I will hope for that,” she said. “I try not to take out loans. I’ve done all the things I can, like grants and scholarships.”
Christine said some may look down on her reliance on welfare, but she sees it as a temporary situation.
“It’s a crutch for me to use right now to have not just a job, but a career of substantial worth,” she said. “I could go back to being a bank teller, but I wasn’t making ends meet and I want to make an emotional and spiritual impact (with my career.)”
The congressional inaction to fix the student loan situation was not surprising, Christine said.
“People who make the rules don’t live normal society lives,” she said. “They are not living on $400 a month with a teenager. I would like to see the president go grocery shopping on that.”
Though times are tough, Christine tries to focus on the positive.
“It’s challenging and also gratifying in another sense,” she said. “I learned to manage my money and make priorities.”
The financial hardship has also served as a lesson for her son, who knows to focus on education and build a career with financial stability.
“He doesn’t want to struggle like he’s seen me struggle,” she said. “He is going to get a career.”
Christine is one of thousands who will be negatively impacted by the student loan interest rate increase.
The higher rates apply to new loans, and only Congress can change the rates. It’s unclear whether any deal will be reached before the end of summer, when the number of students taking out loans will ramp up ahead of the school year.
Roughly 2,000 students take out loans at Sierra College, said Sierra College financial aid director Linda Williams.
“Doubling the interest rate will make their highly monthly repayment bill higher and a larger payoff for all loans that are being certified July 1 and forward,” she said.
“I think it’s terrible,” Williams said. “These sorts of things are supposed to work in a bipartisan way and it affects millions of people. I think it’s shameful that they haven’t been able to work to make an agreement.”
Part of the problem with student loans is naivete and misinformation about the cost of repayment, Williams said.
“The need is so high and, honestly, the money is not real to them,” she said.
“The repayment process is not real to them, so they don’t understand the pain this will cause in the future.”
With a 6.8 percent rate, some students would be better off applying for loans in the market.
“Congress makes money off student loans and they’re just going to make more money by artificially increasing an interest rate,” Williams said, adding that the federal loan program is the only student financial assistance program that is guaranteed to be offered, luring students in.
“They’ve taken an entitlement program and doubled the interest rates, which locks students into this program,” she added.
“They couldn’t go out into the market to find loans because some kids don’t have the credit.”
For some students, like Christine, there are no other options besides loans.
“They feel that they have to do it,” Williams said. “They don’t have a choice.”
To contact Staff Writer Jennifer Terman, email firstname.lastname@example.org or call 530-477-4230.
“People who make the rules don’t live normal society lives. They are not living on $400 a month with a teenager.”
— Christine M., Sierra College student