Future college graduates — already facing bleak job prospects in a poor economy — are also facing the possibility of paying twice as much in interest on certain types of federal education loans.
It’s an issue that has taken center stage as President Obama tries to whip up the youth vote, and most politicians, including his Nov. 6 foe, Republican Mitt Romney, agree that the 3.4 percent interest rate on subsidized Stafford loans should be extended to prevent interest rates on future loans from doubling, to 6.8 percent.
But, as with many of the debates in Washington these days, there’s disagreement on how to pay for it. The inaction only fuels the uncertainty that Stafford loan recipients like Martin Liu, a junior finance major at SUNY Canton, face in postgrad life.
“Putting this burden on students is not an appropriate way to finance the deficit,” Mr. Liu said.
Many north country college students receive the types of loans that could increase — though the spike would affect only new college loans, according to President Obama, who has been prodding Congress to reauthorize the low-interest loans in college campus speeches, including one Tuesday in Albany.
At SUNY Canton, 2,368 students out of 3,862 received subsidized Stafford loans in the 2010-2011 academic year, or 61 percent. At SUNY Potsdam, 2,563 students out of 4,200 received subsidized Stafford loans, also 61 percent. At Jefferson Community College, 945 out of 4,116 students received the subsidized loans, or 23 percent.
In April, Rep. William L. Owens was one of the few Democrats in the House to cross party lines to vote for a bill that would extend the low interest rate, which originally was passed in 2007.
That’s despite the fact that he didn’t like how the $5.9 billion, one-year extension was paid for, and that he correctly assumed that the Senate would not pass it and that President Obama wouldn’t sign it. It was more of a statement than a vote.
“In analyzing that, I felt it was very important to send a strong message to students that we’re not going to raise the interest rate,” Mr. Owens said.
The House of Representatives, controlled by the GOP, voted to pay for the extension by taking money from part of Mr. Obama’s health care law that funded preventive health care measures — derided by opponents as a “slush fund” for Health and Human Services Commissioner Kathleen Sebelius.
“I was not happy with” how the bill paid for the extension, Mr. Owens said.
Nor was he particularly happy with the Senate’s proposal, which was blocked by a GOP filibuster Tuesday. It would have raised taxes on certain types of corporations, which Mr. Owens said probably wouldn’t have been enough to cover the cost.
He said the Senate was likely to come back with a “more sensible” proposal before the July 1 deadline. One idea, he said, would be to implement the ideas put forward in a Government Accountability Office report, which identified $100 billion in cost savings.
“You’d still have $94 billion to put towards deficit and debt reduction,” Mr. Owens said.
But not every politician is sold on the idea of extending the low interest rate.
Kellie A. Greene, who is on the ballot for a June 26 GOP primary, said she would not blush at letting the rate increase to 6.8 percent.
She’s a student at the Fuller Theological Seminary in California, and has outstanding college loan debts, she said. She said the government can’t afford to extend the interest rate, even if it means interest rates double on students.
“I’m not saying it’s not a burden. It is,” Ms. Greene said. “But the burden for the taxpayers is far greater at a time when we don’t have the money, and we need to be making some tough decisions at the federal government level and learning when to say, ‘No.’”
Her June 26 primary opponent, Matthew A. Doheny, said he would have voted in favor of the House bill, but it was more because of what it cut than what it preserved.
“I’m against government basically picking winners and losers with subsidies, but you have the opportunity to vote for a bill that removes a $6 billion slush fund that an unelected cabinet member has control over,” Mr. Doheny said.
Mr. Doheny said that he had about $150,000 in student loans after he graduated from Cornell Law School, and interest rates were about 8 percent then.
“At some point, you still have to get back to what the actual market will dictate,” he said.
Mr. Liu, the college student, was more keen on the government’s role in student aid.
“Government should be there to help them get enough financial aid,” he said.
He argued that increasing the amount that students will have to pay could make them unable to do so. Mr. Liu said that input from college students was an important part of the process.
“They have to at least talk to the people it’s going to affect,” he said.