Congress voted late last month to prevent the interest on student loans from doubling, keeping it at its current rate. However, for many students, this decision is only a short-term solution to the larger struggle associated with the cost of attending college and increasing student debt, which totals to nearly $1 trillion.
Although the student loan interest rate will remain at its current level of 3.4 percent, the federal government also decided to remove the six-month interest grace period for undergraduate and graduate loans, which require students to pay interest on graduate loans while in school. Some say this is a disincentive for students to pursue a graduate degree because it would increase their debt.
As funding to public education has decreased, tuition has increased, causing many students to take out more loans to pay for their education. In order to help students manage their finances, Associated Students offers legal and financial services, which allows students to receive 30 minutes of free counseling from practicing attorneys and professionals, according to Vice President of External Affairs Tom Rivera. He added that A.S. will continue to lobby for student needs at the local, state and federal levels.
“We’re seeing national student loan debt exceed credit card debt now so an affordable interest rate is extremely important for students who need some help to pay for school,” Rivera said.
According to data compiled by The Institute for College Access and Success, 43 percent of San Diego State graduates left the university with an average debt of $16,104 in 2010. But this number pales in comparison to the national student debt average.
The Federal Reserve Bank of New York published quarterly historical charts on national student loan data, which show the number of borrowers has increased from 23.3 million in 2005 to 37.1 million in 2012. The average student loan balance has also grown from $15,651 seven years ago to $24,301 in 2012.
“Student loan debt is the only form of consumer debt that has grown since the peak of consumer debt in 2008,” the report states. “Balances of student loans have eclipsed both auto loans and credit cards, making student loan debt the largest form of consumer debt outside of mortgages.”
But thousands of California State University students could receive a tuition refund if the Board of Trustees accepts Gov. Jerry Brown’s “tuition deal.” If Brown’s tax initiative passes in the November election, the CSU system would receive $125 million in additional funding for the 2013-14 school year if it keeps tuition at the 2011-12 levels.
However, if the initiative does not pass, the CSU will automatically receive an additional $250 million cut. Although the board considered several budget alternatives for this outcome at its meeting last week, it will not vote on any of the options until the next meeting in September.
“We are at the point where the use of one-time funds to address ongoing budget cuts is not sustainable,” said CSU Executive Vice Chancellor and Chief Financial Officer Benjamin Quillian. “It is not possible to continue to patch over budget holes. We need to take actions that reduce our costs going forward. That is the only way we will be able to serve students with the classes and support services that they need.”
Despite the potential gap in funding, many student groups are supportive of the tax initiative because it could maintain current tuition levels and help ease the financial burden for thousands of students. On July 15, the California State Student Association passed a resolution stating its support of the initiative. The CSU board also voted to support the measure at its meeting in Long Beach earlier this month.
When he signed the student loan bill into law earlier this month, President Barack Obama said he recognized keeping the interest rates low would benefit students. However, he also urged Congress to continue to find alternative ways to do so while also providing more financial aid to students.
“In today’s economy, a higher education is the surest path to finding a good job and earning a good salary and making it into the middle class,” Obama said when he signed the loan interest bill. “So it can’t be a luxury reserved for just a privileged few. It’s an economic necessity that every American family should be able to afford.”
