By Ryan Wolf and Chris Woods
Stony Brook students have dodged a huge financial bullet with the passage of the Bipartisan Student Loans Certainty Act. The bill was signed into law Aug. 9, 2013 for the purpose of reforming a part of the 1965 Higher Education Act.
Director of Stony Brook’s Office of Financial Aid and Scholarship Services Jacqueline Pascariello believes the change has come as a relief for parents.
“I don’t know about students, but amongst parents I think there is a lot of relief,” she said.
The bill was sent to President Barack Obama for signing after passing the House of Representatives with a margin of 392-31 and the Senate with a vote of 81-18. The support for this bill has been one of the few instances of bipartisan cooperation seen in the newly convened Congress. This new act will affect the 12 million students in the United States who have taken out loans, which amount to $1 trillion in outstanding national debt.
This bill came recently after Congress failed to stop an increase in student interest rates from an original 3.4 percent to 6.8 percent on July 1, 2013.
Pascariello said the new legislation will thankfully bring the rates back to levels close to what they were originally and soften the impact on Stony Brook students.
After the initial spike to a 6.8 percent rate, she said that when “freshmen were coming to campus and were doing orientation, we were saying ‘6.8 percent’ and were waiting to be stoned. But before the beginning of the term, Washington did its thing and for at least this year, the sub-and-unsub for undergraduates is 3.86.”
For graduate students, the interest rates will also be lowered to 5.4 percent for loans issued after July 1. With these new rates, experts estimate that the average student will save $1500 between July 2013 and July 2014.
This piece of legislation also ends the practice of variable interest rates that would change the amount a student would have to pay each year and adopt a policy of fixed interest rates for the lifetime of each loan.
To control unpredictable increases, the law caps interest rates at 8.25 percent for undergraduate students and 9.5 percent for graduate students, meaning no loan can have an interest rate higher than these maximum amounts. These interest rates will be tied to financial markets, meaning the following years rates will be determined each June. According to the Congressional Budget Office, this act would also help to lower the nation’s deficit by $715 million by 2023.
Critics of this bill have warned that while interest rates are now decreasing, after 2015 rates will increase as the economy begins to significantly improve and students will eventually have to pay more.
Ms. Pascariello is also concerned about the likelihood of increased rates as financial markets improve.
“As the economy rebounds, [rates] could absolutely increase,” she said. “I think that we’ll see that [increase] at some point, I don’t think it’s likely in the next few years.”
Stony Brook students are no stranger to problematic loans, with many feeling the effects of unbearable interest rates and the weight of being unable to completely pay off debts from school in a timely manner.
Freshman electrical engineering Collin Champagne said the new legislation has come as a relief.
“I had to get a loan so I can’t really afford college anyway,” Champagne said. “So it really would be difficult to pay a higher interest rate on the loans.”
But Champagne added that he was still concerned about the rates rising as financial markets improve. “Inflation of rates don’t help students,” Champagne said.
The fight against rising college costs is set to take place in the fall of this year during the reconstruction of the entirety of the 1965 Higher Education Act, but those who have loans hanging over their head can take comfort in the fact that, as President Stanley states in a Huffington Post article “these loans are not only a good investment in the earning power and job security of the students who use them, but also in the well-being of the whole nation.”
“I would just like to say that borrowing for your education is not necessarily a bad thing. Borrowing in moderation is a good thing,” Pascariello added. “But to take out the absolute most that you can just because you can? It’s about what you need not about what you want.”