Congress Debates Raising Interest Rates on Student Loans

As the House of Representatives is pending the Higher Education Act of 2005, many students throughout the university are asking themselves, what happens next?

The Higher Education Act, initially passed in 1965 and last reauthorized in 1998, is due to be reauthorized yet again. This time as well as providing aid for eligible students, there is an additional goal: reducing the nation’s deficit.

The Financial Aid office here at the University of Vermont is anxiously awaiting the decision by the House, having already been passed by the Senate last month. If passed, it only needs to be signed by President Bush, which is expected, to be enacted into law.

“It is frustrating,” Jeffrey Wallin, assistant director of financial aid here at the university said. “Now is the time when prospective students are deciding whether or not UVM is the right school for them. Now is the time where we should be putting together the financial situation for next year. But, it’s law and legal things tend to get dragged out.”

For many prospective students, financial assistance in funding their education is a serious factor for deciding whether or not to attend a particular university. There is also the question of how students already attending UVM will be affected if the bill is passed.

Those who follow the news have probably noticed the jaw dropping $12.7 billion estimate in cuts from Financial Aid over the next five years. A common misconception is that this money will be cut from the funding for financial aid.

However, this is not the case.

The bill would instead fix the interest rates of both Stafford Loans and Plus (Parent) Loans, which are both currently flexible. What this means is that students and parents will have to pay more in the long run for attending the university, which is estimated to cost students and parents $12.7 billion.

In 2003 alone, 18.2% of students were receiving aid through Stafford Loans and 20.2% of students through Plus Loans, enough to make this a pressing issue for many students here at UVM.

Although this may look grim while attempting to plan financially for your future with the ever-rising costs of college tuition, Wallin has found an upside.

“I spend a lot of time helping students plan financially throughout their years here at the university. I believe that the fixed interest rate will make students more careful about borrowing only what they need, not what they can.”

In addition to this, the bill would expand the Pell Grants, which are given to low income students, determined by an eligibility formula. These students would be eligible for new “Smart Grants,” which would be given to those students intending to major in math, science, engineering, computer science, technology, or certain foreign languages.

“We’ll take anything they give us,” said Wallin, “But I wish that these grants would be offered to all majors of interest.”