The Free Press, Mankato, MN

Local News

July 3, 2013

Students leery of student-loan rate hike

MANKATO — Nyamuoch Giek squeaked in just under the wire.

The Minnesota State University senior already did the walk-through for graduation, and she's finishing up with several classes before making it official. That's why Giek was a little relieved this week when she heard about Congress failing to act to prevent student-loan interest rates from doubling from 3.4 percent to 6.8 percent.

That's quite a jump, she said — enough to concern her a little bit about her four younger siblings who will likely be matriculating to state colleges and universities. Had it happened while she was taking loans, Giek said she might have given pause before accepting student loans.

“That's definitely something that would have affected my decisions,” she said.

For Derek Schultz, the news is affecting his decisions. Schultz has started thinking seriously about going back to school as a non-trad, maybe at South Central College, he said.

But already working odd jobs to make a living, the idea of piling on additional costs to attend school has him thinking about whether now is the best time after all.

“The cost is already so high,” he said. “I have friends carrying $50,000 in student-loan debt who can barely pay the monthly payment. Lawmakers have to realize what they're doing to students.”

The new interest rates will go into effect for students taking out Subsidized Stafford loans for fall unless Congress fulfills its pledge to restore lower rates after returning from the July 4 holiday. The loans account for about 25 percent of all direct federal borrowing.

Congress' Joint Economic Committee estimated the cost passed to students would be about $2,600. Even when lawmakers return, there's no guarantee there will be the votes to restore the lower rates.

Students only borrow money for one year at a time. Loans taken before Monday are not affected by the rate hike.

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