Student Loan Increase Could Create Barriers To Higher Ed

Students loans could double from 3.4 to 6.8 percent if Congress does not act before July 1.

cathedral hs students

Photo: Elle Moxley/StateImpact Indiana

Students in Cathedral High School in Indianapolis research John F. Kennedy's presidency.

If Congress does not act before July 1, students could see interest rates on their loans double from 3.4 to 6.8 percent, and Indiana education officials say that would put up significant barriers to higher education.

President Barack Obama called Friday on Congress to pass legislation that would stop interest rates on subsidized student loans from automatically doubling in July.

Republican members of Congress are proposing tying interest rates to market conditions.

DePauw University spokesman Ken Owen says rising interests rates can place an undue burden on students.

“What you don’t want to do is create a scenario where only those people that have the means to do college as a viable option,” he says.

Indiana is providing some cushion in case Congress does not find a compromise. State Representative Bob Behning (R-Indianapolis) sponsored legislation that passed General Assembly that makes more state loans available to students using what’s called the Indiana Secondary Market for Education Loans.

“It is extremely important because not all student are eligible for student loans on a federal level,” he says. “And with what we have done with Indiana Secondary Markets is we have actually expanded the scope of it and the number of sources available to students, so if they can’t get direct lending on a federal level from someone like Sallie Mae or something similar, Indiana Secondary Markets can step in and provide those services.”

Roughly two-thirds of Indiana students graduate with debt and the average student graduates with $27,000 in debt.

Amanda Solliday contributed to this report.

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