Student loan rate doubles, but bigger bills not imminent
SPRINGFIELD — Today's doubling of some student loan rates polarized suburban members of Congress, but graduates grinding through the working world to try to pay off their college debts need not worry about their monthly payments rising.
The new rates are for one particular set of government-backed loans and only for new borrowing after July 1. Students wouldn't have to pay bills with the bigger rates until after they leave school. So the next bill in the mail won't be any fatter.
“I think that's one of the misconceptions out there,” said Rebecca Babel, Northern Illinois University director of financial aid.
The loans facing an interest-rate jump to 6.8 from 3.4 percent are available to low- to middle-income students, Babel said, after they have exhausted some other financing options and can demonstrate they need the lower-interest loans.
“This is the last of the student loans that isn't already at a higher rate,” Babel said.
Students who start their fall terms in August could have to borrow at a higher interest rate if Congress doesn't act, and the issue has split the suburban congressional delegation.
Republicans in the House like U.S. Rep. Peter Roskam of Wheaton blame the Democratic-controlled Senate for not voting on a plan approved by the House earlier this year.
The proposal would have tied future loan interest rates to market forces in an effort to take the annual decision out of lawmakers' hands.
“Congress repeatedly passes short-term fixes in a race-against-the-clock mentality to stop this from happening,” Roskam wrote in an op-ed that appeared in the Daily Herald last week.
At the same time, the suburbs' trio of freshman Democrats — U.S. Reps. Bill Foster of Naperville, Tammy Duckworth of Hoffman Estates and Brad Schneider of Deerfield — have backed a competing House plan that would freeze the interest rate at 3.4 percent.
“We need to work together to make higher education more affordable and accessible because only by enhancing our nation's education opportunities will we maintain the best educated, most innovative and most productive workforce in the world,” Schneider said in a statement.
The price of college continues to be a hot topic as Illinois' massive financial troubles have helped drive big tuition increases over the last decade.
Congress still has time to act on loan rates before most students feel the pinch.
Babel said the starting date of a loan is typically the first day of school, which comes in August for most universities. There's hope for lower interest rates if lawmakers don't act by then, too, she said.
“They could even act later than that and make it retroactive,” she said.