Paying for college might become more affordable for students, who are relying on subsidized federal loans if a higher education proposal passes through Congress.
The College Student Relief Act of 2007 was designed to reduce the interest rates calculated on subsidized federal loans. The current interest students pay on the loans is 6.8 percent. Supporters of the act want to gradually reduce the interest to 3.4 percent by 2011.
Who would the College Student Relief Act of 2007 affect?
The act would affect only students borrowing subsidized loans in 2007-08 and preceding years. The decrease would be gradual until interest rates reach 3.4 percent. From there, the interest would be fixed.
How would the decrease in my payments be calculated?
The decrease would affect only subsidized loans. They would be reduced as stated.
How much money are VCU students borrowing this academic year?
VCU students are borrowing a total of $54 million in subsidized loans and $74.8 million in unsubsidized loans.
Where should I go for information on my own financial situation?
Contact the VCU Financial Aid office:
Monroe Park Campus
Ginter House, Shafer Court entrance
901 W. Franklin St.
P.O. Box 843026
Richmond, Va. 23284-3026
Telephone: (804) 828-6669
Fax: (804) 827-0060
TDD: 1-800-828-1120
E-mail: faidmail@vcu.edu
Hours: Monday- Friday,
8 a.m. – 5 p.m.
Susan Kadir, director of the VCU Financial Aid office, said the proposal would benefit students to a limited extent.
“I think any time you lower the interest rate on student loans is a good thing,” Kadir said. “And when you consider that our students. are borrowing about $20,000 each, it’s to the students’ advantage.”
The proposal does not address interest rates for unsubsidized loans or the rising cost of education. The act also fails to address interest calculated on alternative loans, which are “dramatically increasing,” Kadir said.
Public Interest Research Group is the national organization that is trying to push the act through Congress. According to PIRG, the act would save an average borrower up to $4,430.
Rose Garr, mid-Atlantic field organizer at PIRG, said the act is a result of increasing tuition costs, the number of college students nationwide and the “frozen” grants provided to students.
“Lowering interest rates on loans is a great first step towards providing students and families with a more affordable education,” Garr said. “This bill pays for better benefits for students by cutting excessive federal subsidies to private lenders.”
The bill would hurt private lenders by reducing their profits. Kadir said some small lenders might even stop offering subsidized loans. Such a situation would not significantly affect students, however.
“You’ll still have the giants in the industry,” Kadir said. “They will be making money at some point.”
The reduction of student debt may encourage some students to borrow more, she said.
Subsidized loans, unlike unsubsidized ones, are limited. Kadir said the proposal would be more beneficial if it included both types of federal aid.
“I hope the law goes far enough,” she said. “The law should address the unsubsidized loan because it is the unsubsidized loan where the interest is being paid by the student while he or she is in school.”
The federal government pays the interest rates on subsidized loans until students graduate. If the proposal passes, the government would have to pay less interest on those loans, Kadir said.
Gerr could not explain how the federal budget would be balanced to support the budget proposal. According to Washington Post columnist Robert Novak, “Other student loan programs will be cut to help cover the $7 billion cost over five years.”
The act passed the House of Representatives last week and is currently referred to the Senate Committee of Health, Education, Labor, and Pension.