Connecticut Reactions Mixed On Student Loan Deal

As word spread of a Congressional compromise on student loan interest rates reached in Washington on Friday, reactions to the agreement among Connecticut officials and students were decidedly mixed.

On the one hand, they praised a deeply divided Congress for managing to pass what it did: legislation that will extend for one year interest rates of 3.4 percent on government-backed Stafford student loans. Under legislation passed in 2007, that interest rate had been slated to double, to 6.8 percent, on Sunday — a change that would have increased costs for more than 7 million students nationwide.

But people in Connecticut were also critical of the uncertainty that the deal creates for students by only holding the interest rates at a fixed rate for one year. If Congress does not renew the legislation next year, interest rates could change, which could make it difficult for newly graduated students to plan their finances.

Courtney

“We need to have a long-term policy of affordability for higher education,” U.S. Rep. Joe Courtney said in an interview with The Courant. “Having said that, in this Congress, this is actually a great achievement. To get anything to point where we are today is almost impossible in this Congress.”

Courtney, a Democrat whose district covers eastern Connecticut, proposed in January that the 3.4 percent interest rate be made permanent, but he ultimately ended up helping negotiate the one-year compromise with House Republicans.

Other members of Connecticut’s congressional delegation, including Democratic U.S. Rep. John Larson of East Hartford and Rep. Rosa DeLauro of New Haven, were more critical in statements after the bill passed, saying the vote should have been an easy one if Congress were concerned about financially vulnerable students.

A doubling of the interest rate did not mean that monthly payments would have doubled. According to the U.S. Department of Education, the average cumulative Stafford student loan debt among students in 2007-08 (the most recent year for which such statistics are available) was about $10,300. Assuming those loans were paid off in 10 years, a monthly payment at current 3.4 percent interest would amount to about $101.37. If the interest rate were to double, to 6.8 percent, the monthly payment would increase to about $118.53 — a difference of about $17 per month.

Even if a student were to take out the maximum allowable amount of Stafford loan debt, $57,000 for an independent undergraduate student, their payments would increase by about $95 per month.

Keeping interest rates low comes at a cost of about $6 billion. That will be paid for in part by increasing the amount businesses pay to ensure their pension plans.

But Courtney said fighting for lower interest rates was a worthy battle because higher payments could ultimately exact a higher price from the nation’s economy in the form of students whose high bills push them out of college classrooms or students who choose to skip post-secondary education altogether.

“The price that you’re going to pay is that you’re basically going to discourage people from going to college who should go to college,” he said.

Eric Bergenn, president of student government at Central Connecticut State University in New Britain, said the measure is going to help everyone for a year but “whether it works out in the long run is yet to be seen. I hope it does work out in the long run.

“If there’s any sort of goal in there to keep higher education affordable, that’s probably the best way to do it,” said Bergen, a senior majoring in economics.

President Barack Obama is expected to sign the student loan legislation in the coming weeks.