Student Loans Just Got More Expensive ... Say What?

By Francine Fluetsch on May 23, 2017

image via Tuition.io

If you didn’t think student loans sucked enough before, it just got a whole lot worse. The government has decided to kick us students while we are down and add roughly a 20 percent increase in interest rates to loans that are already extremely difficult to pay back. Most people can celebrate being college loan free when they enter their forties, but now it might take even longer. This seems to mainly be targeting undergrads, but grad students can probably expect a small hike to happen as well.

According to this article by Shahien Nasiripour, interest rates are going to rise by 0.69 percent in July for federal college loans. This might not seem like a huge jump, but owing an extra few hundred dollars each semester/quarter is going to cost you, and take just that much longer to get rid of when you finally graduate.

To give you an idea of the new damage, Nasiripour writes, “New undergraduate loans from the Department of Education are due to carry an interest rate of 4.45 percent, up from 3.76 percent for the academic year ending in June. Rates on some graduate loans are set to rise from 5.31 percent to 6 percent, while rates on loans to parents and guardians are due to experience a jump from 6.31 percent to 7 percent.”

So why should we be worried? Those don’t look like they spiked all too drastically, right? The problem is, this is being smothered on top of the fact that tuition keeps getting hiked every year, while grants are getting fewer by the second, meaning that more families and students are forced to take out more in loans if they want higher education.

The people who aren’t crying about this would be private loaners like Sallie Mae. If federal loans keep rising, more people might look to get their loans privately. Before, it was usually more beneficial to get a federal loan since the interest rate was usually lower, but if the private loan interest rates stay steady, they might be able to use the government increases to their advantage. Feels icky either way, but both private loaners, as well as the government, know that students will keep borrowing money since college is becoming more of a necessity in the job market.

So why is this hike happening now exactly? Haven’t we been through enough? Well, it started out with good intentions, as most things do. According to Nasiripour’s article, the interest rate increase stems back to a provision signed by President Obama back in 2013. The idea was to move away from a system where congress had the power to dictate and define interest rates years in advance in favor of one where rates would be tied to the government’s cost of borrowing over 10 years. In short, this was supposed to benefit students in that the interest rates would be low when the economy was stagnant and not growing, and would be higher as the economy began to soar.

The economic forecasters predicted that our economy would be growing much faster than it has been, and therefore thought that interest rates would be much higher today than in 2013, but our economy is still moving at a relatively slow pace.

The small amount of good news comes for those who have already taken loans out. Luckily, the interest rate for those will remain fixed through the duration of the loan’s life, and will only affect those who have to take one out after July 1.

According to this article on CNBC, Mark Kantrowitz, vice president of strategy for college and scholarship search site Cappex.com, is trying to keep student morale up by stating, “The financial impact of this increase is on the order of a few dollars a month on a 10-year repayment plan for every $10,000 borrowed,” but we as students know that the hikes aren’t going to end here. Even if Mr. Kantrowitz is trying to convince us that interest rates are still historically low and that the hikes won’t really affect students all too much, we are the ones who are still stuck taking out the loans, and, by the time we are in our fifties, will probably still be paying them off.

What should you do? If you have to take out loans after July 1, make sure to do your research and see if a federal loan is still the way to go or if you should start looking privately. Get a second opinion from your parents and also see what your academic advisor would recommend; they are very skilled when it comes to mapping all of this out and should be able to find a plan that will work out best for you in the long run.

The next time a baby boomer calls you a lazy millennial or tells you that you have it all made for you, remind them exactly why you’ll be paying off your loans until you’re 50, while they could pay their whole tuition with a part-time job. These are unfair times that we live in.

But hey, chin up, we can’t let them tear us down.

Hi! I'm Francine and I'm a fourth year Creative Writing major at UC Santa Cruz. I am one of the Campus life columnists on Uloop's National Team and also the campus editor for UCSC. I enjoy reading, writing, and taking selfies with my cat.

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