A Washington, D.C.-based interest group has issued a report which finds Iowa students will have to pay, on average, around two-thousand more dollars on basic college loans because interest rates went up July 1st. Interest rates on Stafford loans rose on both existing loans and new loans, and Earl Hadley, the study’s author, says it’ll have a huge impact on students and their families.
“In Iowa, the new interest rate changes would force borrowers who take out new loans to pay an additional $1,925,” Hadley says. “Those with existing loans would pay an additional $2,317.” Hadley did the analysis for the “Campaign for America’s Future.”
He says an affordable college education is a “lynch pin” of America’s success economically and politically.
“We know that college prepares the next generation of workers as well as voters so we’re in a situation where college is becoming more and more expensive and the federal government is not doing its job to keep college affordable,” Hadley says. “We felt there was a need to make the public aware of this and hopefully engage the public in a discussion of ways to press the federal government in taking the lead to make college affordable.”
Hadley says there are a number of things Congress could do. A bill in the House and Senate would cut interest rates on new Stafford loans in half, a move Hadley calls a “baby step” but a “good step.” He says the House and Senate have also failed to extent the tax deduction that had been available for college tuition. Hadley’s group is also pressing for a new tax credit for college tuition, as well as an increase in federal grants for college students.
“In the past, the Pell Grant which has been sort of the main federal grant program took care of about half of tuition, room and board. Today, it only takes care of about a third, so there’s, you know, a huge drop-off in the commitment the government has given to making college affordable in the past 20 years or so,” Hadley says. “We need to reinvest in our students and our country.” The interest rate on existing Stafford loans is currently 7.14 percent, up from 5.3 percent. The rate on new loans is 6.8 percent. Parents who take out so-called PLUS loans for a child’s college are paying higher rates, too.
Hadley’s report concludes the average parent who’s paying on an existing PLUS loan will pay about three-thousand dollars more because of the interest rate hike. The report also shows that tuition at the average four-year public university has gone up 40 percent since 2001.
According to statistics from the Campaign for America’s Future, nearly two-thirds of all college graduates have students loans and that debt forces major delays in important life decisions. The group claims college debt causes 14 percent of young college grads to delay marriage and 38 percent to delay buying a home because of their college loans.