Ariz. students watchful as Senate accord on loans falters

2013-07-13T00:00:00Z Ariz. students watchful as Senate accord on loans faltersJonathan Reid Cronkite News Service Arizona Daily Star
July 13, 2013 12:00 am  • 

WASHINGTON - For a couple of hours this week, it looked like the Senate would give Alex Miller a chance to relax.

Miller, an Arizona State University senior, faces the possibility that she will have to pay an extra $1,000 this year for her college loan, after a July 1 deadline to keep loan rates from doubling passed without congressional action.

It looked like the Senate had come up with a bipartisan plan Wednesday, according to published reports. But any hopes of a deal were dashed a day later, the reports said, when budget analysts said the plan would add $22 billion to the deficit.

There is still hope that Congress can reach a deal and make it retroactive to July 1, when rates on federally subsidized Stafford loans went from 3.4 percent to 6.8 percent.

Until then, Miller - and as many as 450,000 other students in Arizona - watch and wait.

"It's a little scary" that lawmakers cannot reach a deal on something that Miller says is "so very, very important."

The Arizona Public Interest Research Group estimates that the higher rate would cost the typical student an extra $902 a year. It said the average student in the state has about $19,950 in accumulated debt.

"That's going to have a really negative impact on students' ability to stay in school and graduate in a timely manner," said Rep. Kyrsten Sinema, D-Phoe-nix, of the doubled rate.

But financial aid adviser Mark Kantrowitz said that while a higher rate will certainly hit students, it likely will not keep them from going to college or "cause students to drop out."

"It is not the end of the world, yet it's certainly an increase in their costs," said Kantrowitz, the publisher of Edvisors.com.

He noted that many students have more than just a Stafford loan, which will help spread the pain.

Serena Unrein of Arizona PIRG said a higher loan rate "discourages Arizonans from getting a college education."

Higher rates will have a real impact over time, said Rory O'Sullivan, policy and research director at Young Invincibles.

"We're talking about an extra $1,000 per year per loan - that's going to add up quickly" for Americans who already have more than $1 trillion in total student loan debt, he said.

President Obama had proposed tying loan rates to Treasury notes.

The Senate tried Wednesday to simply extend the 3.4 percent rate. When that failed, negotiations began on the bipartisan plan - another version of the Treasury-note proposal - but that fizzled Thursday.

Sinema could not predict this week whether Congress will reach a deal before its August recess.

"We may continue negotiations between Republicans and Democrats to find some compromise or middle ground," she said. "But given what we've seen from Congress thus far, I wouldn't hold my breath for that."

She said she will continue to push for an extension of the old rate for four years. That would give students and families "the ability to plan for their four-year undergraduate degree."

Miller is concerned about the possibility of a floating loan rate tied to the markets.

"It makes me nervous," said Miller, who has about $20,000 in debt. "For peace of mind as a student, that doesn't make me feel comfortable at all."

As the window for a solution gets smaller each day, Miller hopes students will contact lawmakers to make their voices heard.

"There is still very much this mind-set in American politics that students don't vote and that we don't care about what's happening in Congress," Miller said. "That's just absolutely not true ... we just need to make more noise about it."

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