• May 22, 2015

TEXAS VIEW: Student loan rates affect accessibility - Odessa American: Texas Opinion

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TEXAS VIEW: Student loan rates affect accessibility

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Posted: Monday, August 5, 2013 5:00 am

Staying out of debt is not an option for many college students.

The rising cost of higher education has made it almost impossible for many families to finance a college education without taking out a loan. The interest rate students will have to pay on those loans once they graduate could severely impact their ability to repay the money down the road.

A college degree substantially increases earning capacity, but a college degree does not come with job guarantees. Many college graduates find themselves unemployed or under-employed after graduation.

On average, college graduates in the class of 2011 owed about $26,600 in education loans. For a young adult just beginning a career, that 20-year loan means a monthly installment of about $150 at today’s interest rates.

About 72 percent of student loan borrowers fall into the $26,600 category, but about 16.5 percent of those who borrow for college end up owing $50,000. They face about $450 in monthly payments. Almost 2.5 percent of borrowers end up $100,000 in debt, which will cost them about $1,075 a month for the next 20 years. We culled these figures from a variety of credible sources.

In July, the interest rate on federal-education loans went from 3.4 percent to 6.8 percent, sending congressional leaders scrambling for a plan to bring the rates down.

Congress recently approved a plan to restructure the federal loan program by tying interest rates to the market, which means this year’s incoming undergraduate borrowers will be able to lock in 3.86 percent.

This is good news.

Future borrowers, however, could see a substantial increase in the interest rates they pay. Some analysts predict interest rates will surpass current rates within five years.

Keeping higher education affordable needs to remain a higher priority at all levels — including in Texas. That means keeping tuition and the cost of student loans down.

State governments are notorious for reducing the amount of support they provide state-funded universities. Each time funding is reduced for state-supported universities, students and families have to take up the slack through higher tuition and fees.

Affordability directly affects accessibility. And interest rates affect affordability.

To produce the educated workforce necessary to compete in a global economy, we cannot afford to price young adults out of higher education.

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