Students across the nation - including likely hundreds at the University of Hawaii Maui College - will be paying double the amount of interest for federally subsidized Stafford loans come the fall semester unless Congress votes to reverse the hike that went into effect Monday.
Next week, the U.S. Senate will vote on a proposal that could extend the current interest rate of 3.4 percent until next year. On Monday, interest rates doubled to 6.8 percent, which translates to an average extra $2,600 per student in costs, according to Congress' Joint Economic Committee.
Last school year, 2,728 University of Hawaii Maui College students received subsidized Stafford loans, according to school officials. More than $10.2 million was given to UH-Maui College students in the form of loans, with an additional $10.1 million given out in grants and scholarship money.
Charmaigne Joy Oliveros, a student at the University of Hawaii Maui College, is one of the 56 percent of students who depend on federal funding for their education. She is shown Tuesday working in the campus bookstore.
The Maui News / EILEEN CHAO photo
About 56 percent of UH-Maui College students rely on some form of financial aid, which can be grants, scholarships or loans, college officials said.
"We have heard from students that one of the reasons they chose UH-MC was concern over the debt they'd accrue at other institutions," UH-Maui College spokeswoman Nicole Beattie said in an email Tuesday. "Although Congress failed to address the interest rate hike prior to July 1, we remain hopeful."
The discounted 3.4 percent interest rate originally was supposed to be in effect for the 2011-12 school year, but Congress voted to extend it for another year, according to Beattie. She said she hopes that Senate leaders will help extend the rate for this coming year as well.
Charmaigne Joy Oliveros, a fourth-year student at UH-Maui College, is among the 56 percent of students who depend on federal funding for their education.
While Oliveros does not currently take out any Stafford loans, she said Tuesday that she understands how difficult it would be for her fellow students who may not be able to afford the higher interest rates. The 21-year-old nursing student said that if it were her, she would probably be forced to cut some of her classes each semester and put in more hours at work.
"I would (have to become) a full-time worker and a part-time student," said Oliveros, who works part-time at the campus bookstore.
Though the increased rate hikes commenced Monday, the effects will not likely be felt until students return to campus in the fall (most summer session students took out their loans before Monday and are not affected). That gives Congress a few more months to reach an agreement on whether to extend the lower 3.4 interest rate.
Subsidized Stafford loans taken before Monday are not affected by the rate hike, as are federal PLUS, Perkins or unsubsidized Stafford loans slated for the coming year, according to published reports.
In the meantime, UH-Maui College has developed a debt management plan to help borrowers manage their student loan debt, according to Beattie. The program includes financial literacy lessons and counseling as well as extensive borrower outreach to prepare students going into repayment.
The college also has made efforts to develop new scholarship opportunities, such as the Ka Hikina O Ka La program, in which students interested in pursuing a career in science, technology, engineering and mathematics and related fields within a Hawaiian studies and cultural context may qualify for awards ranging from $3,500 to $5,000.
"With tuition starting at $106 per credit for Hawaii residents and new four-year degree options, it's possible for Maui residents to affordably complete their higher-education goals," Beattie said.
The government is projected to make a record $50 billion in profit on student loans this year, and an additional $21 billion if the 6.8 percent interest rate sticks, according to latest projections issued by the Congressional Budget Office.
* Eileen Chao can be reached at firstname.lastname@example.org.