Higher rates could add $4,000 to student loans
For some Americans, increasing an interest rate by 3.4 percent may not be a cause for alarm. For Cranston native Andrew Iasimone, however, who has incurred $32,000 in student loans in his freshman year at Roger Williams University, this could be a big problem. Iasimone still has five years to go in his pursuit of a double major in political science and psychology with a concentration in forensic science.
Paying back his loans may become even more difficult this summer should Congress increase the interest rates for the Stafford Student Loan from 3.4 to 6.8 percent. If that is the case, students like Iasimone may be looking to pay an additional $4,000 to $5,000 more in interest costs, according to Charles Kelley, executive director of the Rhode Island Student Loan Authority.
That is what prompted Iasimone and three other students to gather at the College Planning Center at Warwick Mall Monday morning with Representative James Langevin.
Iasimone made a personal appeal to Langevin to do his part to help keep the student loan rates at 3.4 percent.
“With my loans as high as they are, it is nearly impossible to achieve the American dream,” said Iasimone. He is referring to his future ability to secure financial independence. Like the other students who spoke, Iasimone is afraid debt will keep him from owning a home or starting a family after college. He appealed for Langevin to urge Congress to put their differences aside in order to keep the rate on student loans stagnant.
Langevin spoke out against the increase, stating that students should be able to “pursue their dreams without the burdens of unnecessary costs and debt.” He said that now is not a good time for an increase on interest rates for student loans, as graduating college seniors are consistently faced with low-paying jobs and the threat of unemployment.
“Graduating college seniors are entering one of the toughest job markets in decades, and they may find themselves accepting jobs with a lower salary than they had planned, or worse – no job at all.”
An increased interest rate of 6.8 percent would “add an average of $1,000 to the life of a student’s loan,” said Langevin, who also noted that this interest rate increase would affect more than 7 million college students across the country.
“The students receiving this need-based aid cannot afford what amounts to a major tax hike on their tuition,” said Langevin.
He went on to note that even with the Stafford need-based loans rate at its current percentage, action must be taken to help students deal with the debt they have acquired.
“College affordability efforts must address ways to help students deal with the debt they are already accumulating, even with the Stafford rate at 3.4 percent.”
Although Langevin is adamant about keeping the interest rate low, the congressman was unsatisfied with the approach that the Republican Party took to keeping the rate at 3.4 percent. “Unfortunately, my Republican colleagues chose partisanship over action by offering legislation to keep the interest rate low but paying for it by cutting the Prevention and Public Health Fund, the purpose of which is to reduce chronic conditions that are driving up the cost of health care for individuals and the state,” he said.
“This health fund has already provided over $2 million in funding to Rhode Island for initiatives that will address diabetes, cancer, heart disease and obesity,” Langevin said.
Raising the interest rate is projected to generate $6 billion annually.
Langevin believes these funds can be realized by other means, including closing tax loopholes. An increase in the interest rate would affect 36,000 Rhode Islanders with Stafford loans amounting to a total of $150 million, said Kelley.
Concerned mother Lynn Notorantonio of Narragansett also made an emotional appeal for Langevin to urge Congress to prevent the rate of student loans from increasing. She said her husband is still paying off his student loans incurred from the University of Rhode Island. She added that last year her son also became painfully aware of the amount of debt he was getting himself into. At the end of his freshman year, he left URI to attend less expensive CCRI. With a daughter attending college next year, Notorantonio is deeply worried about her children’s financial future.
“It’s [paying for student loans] a huge burden and it’s becoming too much for middle class families,” she said.
Like the students who spoke before her, Notorantonio also saw the American dream becoming unattainable to the younger generations.
“With so much debt, they can’t afford the American dream,” she said.
For Iasimone, his college education will come with an enormous debt to overcome. A debt he may have to pay back at double the interest rate of what he originally thought it would be.