FOR IMMEDIATE RELEASE CONTACT: Meredith Kelly
June 5, 2013 (202) 224-7433
SCHUMER: STUDENT LOAN VOTE SET FOR TOMORROW IN SENATE – CALLS ON COLLEAGUES TO KEEP INTEREST RATES FROM DOUBLING FOR TENS OF THOUSANDS OF UPSTATE NY STUDENTS ON JULY 1ST
Tomorrow, the Senate Will Vote on Student Loan Bill to Prevent Interest Rates for Federally Subsidized Stafford Loans from Doubling On July 1st – Jump Will Add Nearly $4,000 Extra Per Student Over Ten Years
Schumer Urges His Senate Colleagues to Keep Interest Rates at 3.4% for Two Years to Ensure College Affordability
Schumer: Senate Must Stop Student Loan Debt ‘Doubling Deadline’ In Its Tracks
The U.S. Senate will vote tomorrow to prevent student loan rates on federally subsidized Stafford loans from doubling, and U.S. Senator Charles E. Schumer called on his colleagues to stave off that interest rate increase, which could raise the cost of attending college for tens of thousands of Upstate New York students and their families. Unless Congress takes action, the interest rates on federally-subsidized Stafford loans will double on July 1st from 3.4% to 6.8%, which could add thousands of dollars in interest payments to the cost of attending college. In 2007, Congress lowered the rate on federally-subsidized Stafford loans – currently held by about 285,000 students in Upstate New York colleges and universities. But without an extension of the reduced rate, interest rates will double for students receiving these loans, driving up the cost of going to college for New York students as much as an additional $3,800 over a ten-year repayment period. Schumer called on his colleagues to step up and pass legislation that would extend the 3.4% rate for two years.
Last year, Senator Schumer helped lead the successful effort in Congress to freeze interest rates for need-based federal student loans, preventing them from doubling for a year. In recent weeks, Schumer has fought with sponsor Senator Jack Reed (D-RI) in bringing the Student Loan Affordability Act of 2013, to the Senate floor before the “doubling deadline.” Now that the vote is set for tomorrow, Schumer is fighting for its passage.
“To put it simply: the Senate must stop the student loan debt ‘doubling deadline’ in its tracks. College is expensive enough as it is, and by allowing the Stafford loan rate to double, we are piling additional costs on students and families,” said Schumer. “Congress need to come together to extend the rate at its current level, so that more students in Upstate New York can walk across the stage and receive a diploma in the coming years, not less. It’s time we do more to invest in our students, not less.”
The current fixed interest rate on federal-subsidized Stafford loans is 3.4 percent. Stafford loans are offered on the full faith and credit of the United States government and, thus, are offered at a lower interest rate than they would be privately. To receive Stafford loans, students must meet rigorous need requirements. Loans are not expected to be paid back while the student is enrolled in college or for a six-month grace period afterward. The federal government pays the interest for the period that the student is in college, unlike unsubsidized Stafford loans.
The Student Loan Affordability Act of 2013 will maintain the current interest rates for the next two years as Congress works towards a long-term solution in the reauthorization of the Higher Education Act. The cost of this bill will be offset by closing tax loopholes. Senator Schumer is intent on ensuring that the offsets for this bill did not come from other already strapped education programs. At a time when student loan debt is second only to mortgage debt for American families, Schumer said that we cannot ask families to add to this debt by allowing the interest rate on need-based student loans to double from 3.4 percent to 6.8 percent.
The College Cost Reduction and Access Act of 2007 set fixed interest rates on newly subsidized Stafford loans for undergraduate students to 3.4% over a set period of time; 6.0% in 2008-09, 5.6% in 2009-10, 4.5% in 2010-11 and 3.4% in 2011-12. However, the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2013 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but rather new loans that will be disbursed after July 1st. In other words, students still attending school after July 1st 2013 that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans only, adding to their already stacking debt.
According to information from the National Student Loan Data System, the average student who receives four years of subsidized Stafford loans would end up paying up to $3,798 more over the course of a ten-year repayment term, if the interest rate is allowed to double this July 1st from 3.4% to 6.8%. This number is obtained by comparing the total amount of interest that a student would pay under either interest rate scenario, assuming that student had taken out the maximum amount of Stafford subsidized loans for four years of college and repays the loans over a 10-year period. Freshman are eligible for loans up to $3,500, sophomores are eligible for up to $4,500, and juniors and seniors may receive loans up to $5,500 for each of the last two years of school.
In Upstate New York there are thousands of undergraduate students that receive federally-subsidized Stafford loans. A breakdown of the number of student recipients of federally-subsidized Stafford loans by school appears below.
· In the Capital Region, 41,330 students are currently receiving federally-subsidized Stafford loans
· In Western New York, 60,395 students are currently receiving federally-subsidized Stafford loans
· In the Rochester-Finger Lakes Region, 41,387 students are currently receiving federally-subsidized Stafford loans
· In Long Island, 59,360 students are currently receiving federally-subsidized Stafford loans
· In the Southern Tier, 32,610 students are currently receiving federally-subsidized Stafford loans
· In Central New York, 41,335 students are currently receiving federally-subsidized Stafford loans
· In the Hudson Valley, 48,705 students are currently receiving federally-subsidized Stafford loans
· In the North Country, 19,136 students are currently receiving federally-subsidized Stafford loans