Absent Congressional action, the financial burden of attending college will escalate significantly on July 1. That is because the interest rate on Stafford loans -- federal fixed-rate loans for undergraduate and graduate students attending college at least half-time -- is set to climb from 3.4 percent to 6.8 percent.
This potential hike should be of grave concern, because it directly and detrimentally affects our economy by limiting college access, affordability, and degree attainment, as well as the career and educational choices of students.
By any measure and at nearly every college or university, the price of tuition and the cost of attaining a degree can be daunting. Even at The College of New Jersey (TCNJ), which is routinely lauded as one of the best values in the nation, the cost of attaining a degree would be out of reach for some without generous aid programs and subsidized loans for low-income students. Stafford loans are the most common method and are among the lowest-cost options available to students for financing their education.
More than 50 percent of TCNJ students receive Stafford loans at present, and that number grows by about 3 percent annually. At private institutions, that number is often much higher. A doubling of the interest rate for those loans will result in very real consequences for our students and our economy.
There seems to be consensus that student loan indebtedness is a very serious issue and that more must be done to ease this burden. Allowing this rate increase to occur will move us in the opposite direction of that goal.
If Congress fails to act before July 1, the interest rate will double on loans needed by more than 7 million students, adding $6.3 billion to students' debt burden in the first year.
The implications of such an increase extend beyond the individual students. Those are resources that will be sucked out of our fragile economy. They are the funds that young professionals could use for a down payment that helps stimulate a struggling housing market. They are the discretionary dollars that a family might devote to a home renovation or vacation. They are the investment activity that is necessary to create a prosperous market.
Furthermore, increasing post-graduate indebtedness will undoubtedly drive students away from careers in public service or at non-profits that are less lucrative than other options. The College of New Jersey is extraordinarily proud of its public-service mandate, and service-learning is embedded in the experience of every student who attends our institution. That ethos has created a corps of graduates who desire to pursue careers that benefit their communities, including 16 graduates this year who will be joining the Teach for America program. Making it more difficult to attract talented teachers, law enforcement officers, social workers, and other public servants will have a ripple effect that extends far into our future and bears unwanted fruit.
I recognize there is disagreement over the funding of Stafford loans, and some have even argued that increased funding of Pell grants would do more to expand college access than avoiding the pending interest-rate hike. While I support expanded funding of Pell grants, I am certain that increasing the debt burden on any subset of students will be harmful to student degree attainment and to our nation's economic health.
As a college president, it is my responsibility is to speak clearly about what is a looming crisis. A failure to act will have lasting and detrimental consequences.
As our elected leaders, both Republican and Democratic members of Congress have a responsibility to work toward a resolution to this problem. Instead, many are choosing to use this as a wedge issue for political benefit rather than to seek a bipartisan solution.
I am trying to do my job. Our students are running out of time for the politicians to do theirs.