Loan Increases Out of Synch with Education Goals

I decided to pursue a bachelor’s degree as a non-traditional student because I wanted a career change that had specific education requirements. Moreover, I sought longevity in the workplace and the ability to plan for my far-off retirement.

At present, politicians and educators focus on the importance of creating a new generation of entrepreneurs and innovators, with an emphasis on math and science programs. The expectation is that the next generation will elevate America to a more competitive level in the global economy. However, to move from a consumer-driven economy to an innovation-driven economy requires higher levels of education and money to pay for this strategy. Increases in loan interest rates, combined with rising tuition costs, will not achieve these goals.

Funding higher education for non-traditional students can present challenges. Historically, loan amounts vary depending on the student’s or parent’s income. Spousal income and dependents also factor into qualifications for non-traditional borrowers.

I received several scholarships and grants during my undergraduate years and still finished the program with a significant amount of federal student debt, as well as an additional private loan to offset attendance at King’s College London. I begin my two-year graduate program at New York University (NYU) in Fall 2013. Reading my acceptance letter filled me with excitement, but soon after, the impact of the congressional sequestration and the July 1 doubling of interest on student loans  left me feeling deflated.

As I prepare for NYU, loans are ever present in my mind. I must negotiate deferments and forbearances for undergraduate loans that are now due, while signing promissory notes for two additional years of loans that come with potentially sky-high interest rates. I am looking for grant and fellowship opportunities, but will most likely need to work in order to reduce my graduate loans. Furthermore, I might need to rethink my plan to consolidate my undergraduate and graduate loans once I’ve finished my master’s program because the difference in my interest rates could vary as much as four to five percent.

The public outcry over student loan debt and the July 1 doubling of interest rates caused Congress to attempt to come up with a temporary solution before the start of Fall 21013 semesters. This solution was recently passed by Congress. It asserts that interest rates on Stafford Loans would be set at 3.9 percent, fluctuating with the 10-year Treasury note. The rates are capped at 8.25 percent, which means they can more that double; the problem we were trying to avoid. Graduate students would pay a higher rate that would cap at 9.5 percent. This means, as the economy improves, interest rates will rise.

This plan is ultimately a stopgap solution to a larger problem. With the new bill, I will make it through my master’s program with roughly a 1.5 percent increase in interest. The downside for future students is that sometime in 2015, rates will most likely double from the current rate.

Do I believe students should pay for their education and pay off their loans? Absolutely. I also believe those costs should be affordable and not require a lifetime to pay off. These rate increases make it prohibitive for people who require loans to pursue higher education and other forms of industry-specific training or retraining. While it might be possible to combine full-time schoolwork with a full-time or 30-hour-a-week job in order to limit the loan amount, students should not have to sacrifice significant time and jeopardize their ability to learn the subject matter because of rising loan costs.

In my situation, I never had a moment where I thought I would not complete my program because the interest rates have increased. However, I do consider that the rising rates might be an obstacle in achieving my goal of saving money for retirement. In my 40s, that is a daunting prospect.