By Senator Kay Hagan
July 26, 2013. North Carolina’s colleges and universities are among the finest in the nation, and our students are among the best and brightest. They are working their way through school or taking out loans to pay for college because they know it is an investment that will pay off in the long run — that will help them reach their goals, land a good-paying job and support their families.
However, as a result of congressional inaction, interest rates on undergraduate subsidized federal Stafford loans doubled from 3.4 percent to 6.8 on July 1st, effectively sticking 176,000 students in North Carolina with an extra $1,000 a year in student loan costs.
Recently, I held several roundtable events with college students and faculty across North Carolina, and nearly every person I visited with stressed the importance of Stafford loans in furthering their education. These loans are need-based, and most borrowers are from families that make $60,000 or less a year.
I spoke with one young man, who is working two jobs in order to attend Central Piedmont Community College. He plans to transfer to UNC-Charlotte this year, but is concerned he will not be able to afford the additional tuition and complete his degree if interest rates on his Stafford loans spike.
That is why I supported a bipartisan compromise, to ensure the interest rates on student loans stay low in the coming years.This bipartisan legislation ties undergraduate subsidized Stafford Loans to the rate of a 10-year Treasury noteplus 2.05%. In 2013, that rate is estimated to be 3.86% as opposed the 6.8% under current law, allowing students to take advantage of today’s low interest rates. In fact, the non-partisan Congressional Research Service estimates that students going to college over the next four years will pay $2,000 less in interest.
The bill, which applies retroactively to loans taken out after July 1st, also caps the interest rate at 8.25% for undergraduate students. This was a major priority for me so that students have some certainty and will not face skyrocketing interest rates four or five years down the road. Additionally, when students take out a new loan, they can lock in their interest rate for the life of that loan.
Though this bill is not perfect, our students – and our economy – cannot afford for Congress to sit idly by while interest rates on education loans double.
Young people are the future of North Carolina’s economy. They will graduate and move on to create businesses, purchase homes and cars, start families, invent, innovate and otherwise contribute to our economy. All of this is made harder when they are saddled with staggering amounts of college debt.
An educated and skilled workforce is also essential to fill the 21st century jobs that are available right now and the jobs we hope to create in North Carolina in the future. We will need workers with education beyond a high school diploma, either from a college or a vocational school.
As a member of the Senate Committee on Health, Education, Labor and Pensions, one of my top priorities has been increasing access to higher education. I am committed to working with my colleagues – Democrats and Republicans – to examine ways to make college affordable for our students as our economy improves.
At a time when the students in North Carolina already graduate owing an average of $23,000 in debt, I could not sit on my hands while students are forced to pay thousands more in interest. Compromises are too few and far between in Washington these days, and I am proud to support this bipartisan bill that will bring immediate relief to millions of students.