The Media On Student Loans
We have a debate going on in Congress about raising the rate on student loans from the current 3.4% to the old interest rate of 6.8%. There is very little coincidence that the Democrat-controlled Congress who passed this change set the expiration date for an election year. Either continue with the Democrat chosen rate or deal with the consequences in November.
However, my issue here is with the media. I’ve read so many sources about this situation and many of the writers aren’t telling the full story. I don’t want to pick on the Warwick Beacon because I’ve seen the same sort of thing in many different news sources, but this is just the one that I’m using for illustration.
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.
Later in the article, Mr. Kelley states:
An increase in the interest rate would affect 36,000 Rhode Islanders with Stafford loans amounting to a total of $150 million, said Kelley.
To me, that’s either simply untrue or really misleading. Let me ask you this, based on what you read there, if you had a pile of student loan debt and Congress changes the interest rate to 6.8%, would you think your payments are going to go up? Of course you would! Not so fast.
The increase would only affect interest rates for subsidized Stafford loans for undergrad students issued after July 1, 2012. Interest rates for existing loans won’t change.
Any Stafford loans originated before July 1 of this year, will keep the old interest rate. So your pile of debt is unaffected by this change. If Congress raises the rate to 6.8%, then don’t use the Stafford program, go to a bank and get a lower rate.
Additionally, the Beacon article mentioned this one student’s $32,000 in loans for his first year, however this rate change will only directly affect federal Stafford loans and not all of that $32,000 is Stafford. We know this because again from the USA Today article:
That estimate is based on a borrower with $23,000 in subsidized Stafford loans, the maximum allowed for undergraduate dependent students.
That’s one of my big frustrations with the media today. You try to be informed and you read the news but often they struggle to get the whole story out.