Students react to new loan legislation


For a student that graduated from USC in 1987, the year a gallon of gas cost 89 cents, monthly rent cost $395, and the cost of tuition and fees at USC was $10,564 for an entire year. A student attending USC in 2013 paid a price almost four times higher: $43,722

Even though Congress passed a rate reduction for unsubsidized Stafford loans last year, this year’s legislation reduces rates for all federal student loans. Eighty percent of students who are on subsidized loans are also being loaned unsubsidized funds.

The legislation, signed into law on Aug. 9, will save students an estimated $1,500 per year. It also ties the interest rate on all federal loans to the interest rate on the 10 year Treasury Note, the same interest rate the government pays to borrow funds from the public. In addition, the law will postpone an upcoming 3 percent hike in interest rates, which was seen as potentially devastating for incoming students.

The law will also put an end to yearly uncertainty about the change in the interest rate on loans: According to a press release from Peter McPherson, president of the Association of Public Land-Grant Universities, “interest rates on subsidized federal loans for college won’t double from last year, and a long-term fix will be in place to avoid these annual political chess matches over the loan program.”

Besides deterring potential students from attending certain colleges, the rising expense of tuition has forced many to take out massive loans for colleges’ tuition, causing a crisis of credit in the student-age demographic.

The average college graduate in 2008 walked off the graduation stage with a diploma and twice the debt as a graduate in 1996. A new report released by the Consumer Financial Protection Bureau on the status of direct federal student loans reveals that 18 percent of debt-laden students are in “distressed borrower” programs or have gone back to school, and 8 percent are in default, which means they haven’t submitted a payment for a year or more.

“I think that it is a shame that in the world’s richest country, students have to go into debt in order to obtain a decent education,” said Chris Patterson, a junior majoring in political science.

Though interest rates will undoubtedly rise at some point in the future, students are safe for now. Many USC students say the impact of student loans on their lifestyle is enormous.

“Some of my closest friends on loans have to make changes in daily spending by avoiding excess unnecessary goods,” said Ideen Saiedian, a sophomore majoring in business. “Although it creates a better sense of judgment with regards to spending and saving, I think that effect is minimal. The greater effect is probably that it influences decisions to get a job during otherwise free time like the summer.”

The new student loan law could be especially important for students at private universities like USC, where tuition rates tend to be much higher than those at public universities.

For Michael Yoshimura, a senior majoring in political science and business, the interest rate reform is a step in the right direction.

“I would prefer it if all federal student loans had 100 percent deferred interest until after graduation, because it would help out a lot of people with paying off that initial interest that keeps on compounding over the life of the loan,” he said. “But any bit off my final bill helps out a lot.”

In a statement prior to signing the legislation, President Barack Obama said, “our job is not done, because the cost of college remains extraordinarily high.”

Obama pledged to continue discussing the possibility for reform in the coming weeks.

USC’s tuition, not including room and board, is well above the average for a private university. According to USC’s online schedule of classes, the current per semester rate is $21,861, or $43,722 for the year. Between 2000-2001 and 2010-2011, prices for undergraduate tuition, room and board at public institutions rose 42 percent.

These statistics lead some students to conclude that the average of $1,500 in savings each year is not enough.

“[It’s] not at all enough to cover how expensive tuition has gotten, especially at private schools like USC,” said Dan Graham, a sophomore majoring in international relations. “With such a minimal change, I think that it’s actually more harmful in the long run because students who aren’t very informed will probably take out more loans than they would have before after hearing about the policy change.”

The USC Financial Aid Office has made a clear effort to combat both the rising cost of tuition and the economic downturn. This is reflected in the office’s mission statement.

“In recognition of the effects of the global recession on families, the total of university-funded financial aid has consistently increased over the last few years,” the statement reads.

Dean of Financial Aid Thomas McWhorter said the university has remained unwavering in its commitment to help students afford tuition.

“Even while the cost of tuition is rising, the university’s commitment to financial aid is pretty impressive,” McWhorter said. “We are continuing to do everything we can to make sure we continue to have need-blind admission and meet the full need of our undergraduate students.”

According to the office’s website, the university awarded over $429 million dollars in financial aid last year, including loans. USC ranks well below the national average in both the cohort default rate and the average debt per graduating student. Forty-five percent of USC students borrow federal loans.

McWhorter said this is due in part to USC’s money-savvy student body.

“We have a very high-quality student body, so our students are successful: They are graduating, making money and paying back their loans,” he said. “We find that students are being pretty judicious about which loans that they take and are making good choices about how they spend money.”

Follow Nathaniel Haas on Twitter @haas4prez2036

1 reply
  1. Russell
    Russell says:

    You skip a couple important facts.

    In 1987 the average starting salary for a college graduate was around $15,500 / year. It was $18,700 when O graduated USC in 1991. It’s $46,400 today.

    In 1987 loans were issued by private lenders and only “guaranteed” against default by the government, today the government issues them, Onama changed that after the financial crises which was caused in part by people notnpayingnback loans.

    Loans are optional no one is forced to take them, but if you borrow money part of being an adult and a responsible member of society is repaying them.

    Government debt as a % of GDP in 1991 was less than 40%. Since 1/20/2009 it has gone from 62% to 108% and the gov will run out of money again in Oct. spending is nothin line with gov income and the current administration has run trillion dollar deficits for 5 straight years.

    Yes tuition is out of hand, but student loans aren’t the problem.

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