Schumer: Student Loan Interest Rates for Thousands of Rochester-Area Students Set to Double From 3.4% to 6.8% This Summer Unless Congress Intervenes -- Senator Pushes Legislation to Block Rate Hike and Keep College Tuition Affordable

Press Release

Today, at the Rochester Institute of Technology, U.S. Senator Charles E. Schumer announced his support for legislation to stave off an interest rate increase for student loans that could raise the cost of attending college for thousands of Rochester-area students. On July 1st, the interest rates on federally-subsidized Stafford loans will double from 3.4% to 6.8% unless Congress takes action to block the rate increase that could add thousands of dollars in interest payments to the cost of attending college. In 2007, Congress lowered the rate on federally-subsidized Stafford loans -- currently held by thousands of Rochester area students. But without an extension of the reduced rate, interest rates will double for students receiving these loans, driving up the cost of going to college for New York students as much as an additional $3,800 over a ten-year repayment period. At RIT, Schumer announced his support for legislation that would extend the 3.4% rate for one year, and urged Congress to take up legislation to make the extension permanent.

"Rising interest loan rates sound like nails on the chalkboard for New York's college students," said Schumer. "College tuition has skyrocketed at universities and colleges across the country, placing a huge burden on middle class families. As the economy is just starting to turn the corner, we need to do everything in our power for a high-quality education at institutions like Rochester Institute of Technology to be as affordable for families and students as possible. Federal student loans are a critical resource for students to help cope with these costs and that's why keeping federal student loan interest rates low is a no-brainer. With July 1st fast approaching, I urge Congress to extend these low-interest rates to keep the dream of going to college alive for thousands of students in the Rochester area."

Schumer was joined by RIT President William Destler, RIT's Assistant Vice President and Director of Financial Aid and Scholarships Verna Hazen, as well as local students from RIT and area colleges who have benefitted from the Stafford loan program or would see their bills increase if the loan rate hike is not stopped. The current fixed interest rate on federal-subsidized Stafford loans is 3.4 percent. Stafford loans are offered on the full faith and credit of the United States government and, thus, are offered at a lower interest rate than they would be privately. To receive Stafford loans, students must meet rigorous need requirements. Loans are not expected to be paid back while the student is enrolled in college or for a six-month grace period afterward. The federal government pays the interest for the period that the student is in college, unlike unsubsidized Stafford loans.

Schumer today announced his support for S. 2051, which is a bill to extend the reduced interest rate for Federal Direct Stafford Loans. The bill, introduced by Senator Jack Reed of Rhode Island, would extend the 3.4% interest rate for one year -- meaning thousands in savings for New York students and students across the country that rely on this loan program. Schumer noted that keeping interest rates low was essential given the skyrocketing cost of college.

The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly subsidized Stafford loans for undergraduate students to 3.4% over a set period of time; 6.0% in 2008-09, 5.6% in 2009-10, 4.5% in 2010-11 and 3.4% in 2011-12. However, the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but rather new loans that will be disbursed after July 1st. In other words, students still attending school after July 1st 2012 that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans only, adding to their already stacking debt.

According to the New York State Higher Education Services Corporation, the average student who receives four years of subsidized Stafford loans would end up paying up to $3,798 more over the course of a ten-year repayment term, if the interest rate is allowed to double this July 1st from 3.4% to 6.8%. This number is obtained by comparing the total amount of interest that a student would pay under either interest rate scenario, assuming that student had taken out the maximum amount of Stafford subsidized loans for four years of college and repays the loans over a 10-year period. Freshman are eligible for loans up to $3,500, sophomores are eligible for up to $4,500, and juniors and seniors may receive loans up to $5,500 for each of the last two years of school

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