BELFAST, Maine — Alex Steed of Cornish had borrowed nearly $30,000 by the time he received a diploma from the University of Southern Maine. He’s working on paying off his student debt, the recent graduate said Friday, but at the end of every month he is broke.
“I live in Maine, where right now there’s very few job opportunities,” Steed said during a telephone press conference held to support congressional legislation to prevent the student loan rate from doubling. “And I think I have it pretty good, compared to others of my friends, who are faced with having to move out of the state to keep up with the money that they owe.”
The U.S. Senate will vote Tuesday whether to maintain the existing 3.4 percent interest rate for federally subsidized Stafford loans, according to Rob Brown of Opportunity Maine, a grass-roots initiative that aims to address Maine’s educational, economic and energy challenges.
If Congress takes no action, the interest rate on new student loans will double on July 1 to 6.8 percent. That would affect nearly 35,000 Maine borrowers, costing them $34 million per year, according to figures released Friday by Opportunity Maine.
In Maine, the average student borrower graduates with nearly $30,000 in loans, according to the Project on Student Debt’s recent report. That is the second highest average student debt load, after New Hampshire’s average loan of $31,048. However, when taking average income into consideration, Maine has the highest student debt burden in the country, said press conference participant Chris Lindstrom of the U.S. Public Interest Research Group.
“Until the economy grows strong again, Congress must help Americans by preventing the interest rate hike,” she said. “Time is running out.”
The 2007 College Affordability Plan reduced the interest rate on need-based federal Stafford Loans from 6.8 percent to 3.4 percent, but the plan will expire this summer unless lawmakers take action, according to advocates of keeping the interest rate low.
But those opposed to keeping the lower rate include Scott Moody, chief economist of the Maine Heritage Policy Center, a conservative think tank.
“These student loans are already subsidized. What we’re talking about is subsidizing another subsidy, making it even bigger than it already is,” he said Friday afternoon. “We’ve been playing this constant, vicious cycle, where we keep subsidizing students to go to college, while the price [of college] keeps going up. It’s not really helping the student.”
Moody described college students as a special interest group that will reap lifetime financial benefits from their education.
“Why is it incumbent upon taxpayers to subsidize that?” he asked. “The Maine university system is already subsidized by taxpayers. At what point do you say enough is enough?
Advocates of keeping the interest rate at 3.4 percent include Jonathan Henry, vice president of enrollment management at the University of Maine at Augusta. He said that more than 80 percent of the school’s 5,000 students are highly eligible for federal student aid.
“Any change in the interest rate is going to impact their ability to repay,” he said during the press conference.
Although Henry said he acknowledges that the increasing cost of higher education in the U.S. has outpaced the general inflation rate and that colleges should do more to keep their costs down, keeping interest rates down is crucial.
“We need to be met halfway, with appropriations that make sense,” he said. “Keeping interest rates down just makes sense.”
Legislation passed in the House last week, but President Barack Obama has promised to veto the bill because it paid for the $6 billion cost of keeping the interest rate lower by eliminating preventive health care funding provided under the Affordable Care Act.
Lindstrom called this “partisan politicking.”
“We were against cutting a preventative health care fund to fund student aid,” she said. “We were disappointed by the partisan politicking around the issue. That’s why we’re asking and urging [Republican U.S. Sens. Olympia] Snowe and [Susan] Collins [of Maine] to do something different.”
On Friday, Obama gave a speech at a Virginia high school about college affordability, encouraging students to tell their members of Congress to work to keep the interest rate lower.
“The good news is, the Senate will vote next week on a bill that would keep student loan rates from doubling. And some Republican senators look like they might support it,” the president said. “I’m ready to work with them to make it happen. But unfortunately, rather than find a bipartisan way to fix this problem, the House Republicans are saying they’re only going to prevent these rates from doubling if they can cut things like preventive health care for women instead.”
Snowe said through a spokesperson that because the legislation potentially could be associated with husband John McKernan’s private business activity, she intends to simply vote “present.” McKernan is chairman of the board of Pittsburgh-headquartered Education Management Corp., which provides private postsecondary education at 108 locations in the U.S. and Canada.
On Friday, Collins said that there is widespread agreement that Congress and the president need to act to prevent the doubling of student loan interest rates.
“Congress and the President must put aside politics and come together to find a responsible way to pay for an extension that would keep these rates low to prevent an unsustainable burden on students and their families,” she said in a statement. “Education plays a vital role in opening the doors of opportunity to all Americans. But, the rising cost of a college education threatens to close those doors. Having worked at Husson University in Bangor, I know first-hand how critical student loans and Pell grants are for many Maine families, particularly for the most economically disadvantaged students.”