Magazine article Diverse Issues in Higher Education

Increasing Student Loan Rates Will Harm Minorities, Experts Say: Some Interest Rates May Increase by 2 Percentage Points

Magazine article Diverse Issues in Higher Education

Increasing Student Loan Rates Will Harm Minorities, Experts Say: Some Interest Rates May Increase by 2 Percentage Points

Article excerpt

For Carmen Berkley, an African-American student leader with five college loans and some knowledge of the financial aid system, the large increase in student loan interest rates on July 1 is still a little bewildering.

"It's very daunting, and I still don't understand it. I don't think a lot of students understand," says the University of Pittsburgh senior who worked with a national lobby group in Washington, D.C., to protect student interests. She is besieged by advertisings and mailings urging her to consolidate her various loans, which total more than $50,000. And, the ads say, she should do this before the July 1 rate increases on Stafford student loans and parent PLUS loans.

Berkley and thousands of other college students will have to come to grips with a shifting student loan market. Gone are the low interest rates of recent years, replaced by higher variable rates that will add up to larger repayments after students leave school.

"We've had a solid decade of happy news on interest rates," says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. "That's coming to an end."

For minority students, the rate increase may also increase their reticence about incurring large college loan debts.

"A lot of students of color feel it was a stretch just to go to college," says Berkley, a board member of the U.S. Student Association. She says her grandmother co-signs her loans and often expresses skepticism about adding more debt. As an out-of-state student at Pitt, her tuition and fees run about $22,000 annually.

This past spring semester, Berkley put off buying her textbooks for one month because of a lack of funds. "I'm just a student with a lot of debt," she says.

Her plight is not unusual, says Nassirian. "Students of color tend to be skeptical of debt financing." Whether to avoid credit problems or because of unknown fears, he says, "They've been trained to shun debt."

While interest rates alone may not persuade minority students to put off their education, it is one of several trends that may affect access, says Thomas Mortensen, a higher education analyst with Postsecondary Education Opportunity.

"Higher interest rates, along with freezing the Pell Grant maximum and escalating tuition, works to the disadvantage of low-income minority students," he says. As a result, more may attend lower-cost institutions or delay college. …

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