Bill may increase costs for students

By Laura Ory
Arizona Daily Wildcat
Friday, January 13, 2006

Students and their parents receiving loans from the federal government to pay for college may soon face higher interest rates and fees.

The U.S. Congress will soon vote on the budget reconciliation bill, which will increase interest rates for Parent Loans for Undergraduate Students in an effort to decrease federal spending.

The bill would save the federal government $12.7 billion dollars over time by increasing interest rates and fees on federal financial aid for students and their parents, said Hassan Hijazi, assistant director of federal relations at the UA.

The bill would increase interest rates for PLUS loans from 7.9 percent to 8.5 percent, said Sarina Unrein, associate executive director of the Arizona Students' Association.

The bill would also strain the wallets of students and their parents by using excessive subsidy payments from students and their parents for tax cuts for the wealthy.

The federal government would save $2.2 billion by cutting the mandatory federal loan delivery funds, and they would save an additional $1.4 billion by charging guarantee agencies a one percent insurance fee on all loans, according to Student Aid Action, a higher education project of the State Public Interest Group.

This means that lenders may end up passing the insurance fees on to borrowers, Unrein said.

Some students would benefit from the bill because it would provide more grant money, it would lower the origination fees of some loans and it would provide a 6.8 percent interest cap for federal Safford student loans, Unrein said.

But the overall effect would result in "deep and harmful cuts" to the federal student loan programs, Unrein said.

Victoria Yarnish, a journalism senior, said she disagrees with the changes the bill would make to student loans.

"If our country doesn't make education a priority, we're going to be left behind in the dust," Yarnish said.

Yarnish said she had to take out a federal financial aid loan to pay for school in the past, and will most likely do so again to help pay for graduate school costs.

"I've understood that for my situation, if I want to go to grad school I will be in debt for a very long time and I can't do anything but accept that," Yarnish said.

Unrein said that ASA is asking students to contact their representatives in Congress to urge them to vote against the bill.

Fernando Ascencio, an ASA director for the UA, said ASA will be on the UA Mall this month to inform students about the bill and give students information on how they can contact their congressional representatives.

"We want students to let (their Congressmen) know that students don't want their aid cut," Ascencio said.