July 1, 2013 9:29:57 AM
Nathan Gregory - email@example.com
While Mississippi University for Women psychology major Kayla Tate finishes her coursework, she mulls what her next step will be. Graduate school is the front runner of her many options.
While she hasn't had to rely on student loans so far, it seems likely she would need a loan to continue her education. As of today, the cost of a student loan has doubled.
With subsidized Stafford student loan rates jumping from 3.4 to 6.8 percent beginning today, Tate said she wasn't so sure she could seriously entertain staying in school after she finishes her undergraduate degree. The financial strain it would create might prevent graduate school from being feasible, she said.
Multiple proposals circulating among U.S. Senators designed to extend the current loan rate failed to pass before today's deadline, meaning the average student would have to fork over an extra $2,600 with the new rates in effect.
With subsidized Stafford loans, the U.S. Department of Education pays the interest for a student who demonstrates financial need, provided the student takes at least six hours of coursework during a semester and begins paying back six months after leaving school. Unsubsidized Stafford loans do not require a demonstration of financial need but students are responsible for re-paying the loan during a semester or interest will accrue and be added to the principal. Lawmakers have the option of restoring the old rates when they return from their July 4 recess.
MUW Director of Financial Aid Nicole Patrick said students should consider taking out loans as a last result after reviewing other opportunities for aid, including scholarships and work studies.
"Every year we encourage students to look for other opportunities besides loans because that is debt they have to repay," Patrick said. "They should come by and visit our office. We'll be happy to sit down with them and talk to them and help them look for other resources."
For people like Tate, the hope is that Congress will do what it did last year and restore the old rates a few weeks after the deadline. Otherwise, it's going to be a lot more difficult for her to pursue a master's degree.
"I'm not even sure grad school would be in the plans if I had to take out a loan to pay for it at that (rate). That would be too expensive," Tate said. "It would affect my decision greatly on whether or not to go to grad school. If I took out a loan it would put me in a hard position."
The same principle applies to Sadye Nelson, who now lives in Columbus but graduated from Indiana State University in 2008. Nelson had to take out loans to finish her bachelor's degree and said she didn't know what her student loan rates were until she had to start paying them. Before students who have to take out loans begin school, they should be made aware of the financial burden they'll face when they're done, she said.
"Being out of school is the only time I realized it," Nelson said. "I think kids are growing up without really knowing how to handle money. I think somebody needs to properly educate (students) and give them examples of how long it's going to take them to pay off that loan and show them what their monthly payment would be."
Nelson said she would have to take out unsubsidized loans, whose rates are not affected, if she wants to go back to school and work on a master's in business administration.
"I was in graduate school and didn't care for the degree I was in. I was in for physical therapy and did it for a semester," she said. "One of the reasons I dropped out was not knowing how much school loans you're going to have to pay. I think you have to make the decision quickly, so that's scary."
Nathan Gregory covers city and county government for The Dispatch.