Student loan interest rates to increase in July

Starting July 1, interest rates on student loans will change from variable to fixed rates. The current interest rate of 5.3 percent, which usually varies with time and from loan to loan, will rise to a fixed 6.8 percent.

The change will increase the average graduate's debt from $15,600 to $17,000, said Kay Lewis, director of the Office of Student Financial Aid.

It is unclear whether a higher fixed rate will ultimately be worse for students than the former varying rate, Lewis said.

"If the rates were going up then it may not have as drastic an effect," Lewis said. "If rates were going down, the students will be paying more for their loans."

WashPIRG representative Nicole Allen said the fixed rate could protect students in the future but only does harm to them right now.

"[WashPIRG] said they should cap it at 6.8 but leave it variable for now," Allen said. "The legislature missed the opportunity to do that."

While the interest rate is rising, the amount of loan money available will not decrease, Lewis said.

"The principle amount that students need to borrow is still available," she said. "It's not that the loan money has dried up or been cut."

One option for students with loans already piling up is consolidation, which would lock in their current interest rate. Lewis said that students who want to consider consolidation should talk to a counselor first, because the decision isn't just black and white.

"Consolidation is fairly tricky in terms to decide when and what loans to consolidate," Lewis said. "For instance someone going on to graduate school wouldn't want to consolidate ... it gets very technical."

Corwin Hockema, chair of Affordable Tuition Now! said that he doesn't believe this will stop anyone from going to college, but students should be aware of their debt.

"Especially if you're a freshman coming in, you don't think about the loans you're going to have to pay," Hockema said. "It's an assumption that when you have a degree you're going to have enough money to pay off debts."

The Office of Student Financial Aid will be distributing information about loans and consolidation in the next few months, and Lewis encouraged students to come and talk to a counselor before making decisions.

"We don't want anyone to be scared away [because of debt]," she said.

WashPIRG is also traveling to colleges explaining how loan cuts and interest rate increase affect students and what actions they can take, Allen said.

"If you want an education and you can't afford it, you have to take out a loan," she said. "The only question is when you graduate if you're going to be able to handle that [debt] -- some students are not."

Reach Daily reporter Jen Ludington at [url='mailto:jenludington@thedaily.washington.edu']jenludington@thedaily.washington.edu[/url]