College students nationwide and on BYU campus find themselves searching for affordable ways to fund their schooling as the cost of higher education continues to rise.
Borrowing tuition money from the government is extremely common among students, and as of July 1, it has become significantly more expensive.
A proposal to keep interest rates for government-subsidized Stafford loans at 3.4% was rejected multiple times in Congress earlier this month. The subsidized Stafford loan, which promises a fixed interest rate once borrowed, distinguishes itself from many private loans by having the government pay all interest while a student is in school and for the first six months after.
Congress’ failure to keep the interest rate stagnant means all Stafford borrowers will now see it doubled. All new loans taken out for the upcoming school year will be accompanied by a 6.8% interest rate.
BYU students who have relied on Stafford loans in the past may try to find alternate solutions now that borrowing means even more spending in the long run.
“It’s basic economics: as price increases, the demand in quantity will go down,” Adam Calderon, a pre-business major and Stafford-borrower, said. “I am no different. I currently have three jobs in order to prevent myself from having to take out any loans this year due to an increase in interest rates. “
For some, however, a subsidized loan is still the best option.
“I don’t really have any other options,” Katie Burdick, a senior from Lehi, said. “I’m two semesters away from graduating and I just got an internship that would be unwise to give up. I don’t have the time to get a second job, so I will be taking out another loan even if the interest rate was tripled.”
Congress’ Joint Economic Committee estimated the cost of interest would increase by $2,600 for the average student. BYU tuition currently sits at just under $5,000 a year, so the increase will be significantly less due to the already-lower tuition.
A $5,000 loan borrowed at the 6.8% interest rate and paid back over ten years would accumulate approximately $1,900 in interest, as opposed to approximately $900 at the 3.4% interest rate.
Despite the percentage increase, the fixed interest rate of a Stafford loan appeals to students.
Sam Mineer, a recently married Civil Engineering major, has relied on his Stafford loan to help with the costs of this past school year.
“I probably could have done more research into other loans, but what I liked about borrowing from the government is the Stafford loan, which means the interest rate will not be in effect until after I graduate,” Mineer said. “This allows me to begin saving money now so I can begin reducing the principal amount, thus reducing the amount of interest I would have to pay in the long run.”
Stafford loans are typically offered only a few weeks before the start of a school year, meaning students have little time left to decide how they will act.
“With a higher interest rate, I would be interested to see what other lenders have available to me…[But] it is hard to beat the subsidized Stafford loan,” Mineer said.