Kiss those historically low student loan interest rates goodbye!
It’s July. Humidity has descended on Virginia, we’re at the height of crab season, and the federal government has spiked interest rates for student loans. It’s the first time the government has raised rates since 2014.
What does that mean for you? If you took out a loan before July 1, you’re in the clear. Anyone who takes out a loan after July 1 will pay more in interest — even if the loans are for the same amount. How much more? Oh, just a thousand bucks. That’s fair, right?
The Federal Government is Abandoning Students
The interest rate increase is the latest in a slew of bad news for student loan borrowers since the Trump administration came into power. In just a few short months, Trump and his incompetent accomplice, Education Secretary Betsy DeVos, have:
- reversed protections put in place to help student loan borrowers
- threatened to eliminate the Public Service Loan Forgiveness Program
- cut funding for Pell grants and Perkins loans
These attacks on students are unlikely to stop, with DeVos ignoring basic evidence of the effectiveness of student protection programs.
In Virginia, the cost for in-state tuition and fees at the state’s public universities has soared by 28 percent since 2013. But federal support for tuition in the form of grants and scholarships hasn’t kept pace with increased costs.
Without reliable government support to help people pay for college, many families have shouldered the tuition hikes themselves, taking out more student loans. Lacking protections and student loan programs, students in our communities are being backed into a corner while searching for affordable options to pay for school.
What Interest Rates Mean for Your Student Loans
With higher interest rates going into effect July 1, undergraduate student loan borrowers will see the interest on their loans go up from 3.76 percent to 4.45 percent. Grad students will see their interest rates go up to 6 percent from 5.31 percent. Finally, PLUS loans, which parents of undergrads and grad students can take out, will increase to 7 percent from 6.31 percent.
NerdWallet has a nifty Student Loan Calculator to help students figure out how screwed they really are.
Students in Virginia graduate with an average debt of $28,000.
Virginia students will pay $5,579 in interest over ten years with the previous interest rate of 3.76 percent. Students will pay $6,673 in interest during a ten-year pay-off period with the new rate of 4.45 percent.
That’s $1,094 more, just to be clear. More than a thousand dollars in interest rates because this administration does not value Virginian students.
Why are Interest Rates Going Up?
The increased interest rates will apply to federal student loans that are disbursed from July 1, 2017 to June 30, 2018. If you already had student debt before July 1, this won’t affect your loans. The higher interest rates will only affect the new generation of young people who are ready to take on the world and who will instead get saddled with the crushing burden of student loan debt.
Federal student loans are tied to interest rates set by ten-year U.S. Treasury bonds. This policy was implemented in 2013 to ensure the taxpayer cost of financing student loans would remain the same. However, since we are only seeing inaction from the current administration to address the rising cost of education, students will continue to borrow more money and the interest will grow.
Nationally, student loan debt tops $1.4 trillion. Americans owe more in student loans than credit card and car loans.
More than one million Virginians have $30 billion in student debt.
There’s no sign the student loan debt crisis will ease up. With these increased rates, in fact, the student loan debt crisis will only worsen.
Virginia’s Role in Ending Student Debt
It’s time to undo the destructive policies of past Republican governors and state lawmakers in Virginia.The Virginia Education Loan Authority, which existed from 1972-1997, issued student loans at low interest rates and refinanced student loan debt. In 1997, the VELA was abolished by former Gov. George Allen (you know the guy who called an Indian-American a “macaca” during a campaign rally).
State lawmakers introduced bills during this year’s General Assembly to protect student loan borrowers. The bills looked to establish a “Borrowers’ Bill of Rights,” create a state ombudsman to watch out for the needs of students in debt, and re-establish a student loan authority. All were killed.
Your Student Loans, Your Vote
This year, Virginia will elect a new Governor, Attorney General, Lieutenant Governor, and the entire House of Delegates. Make student loan debt an issue with candidates for office. Demand that the state government take action to help people living with student loan debt. Ask candidates running for office how they will support students.
Education is a right, not a privilege. Pursuing higher education shouldn’t put people in the poorhouse. Call your representative in Congress and tell them to stop the raid on student aid.