The Bush administration’s rollback of college loans has many students questioning their academic futures

Rogue Community College student Tanya Dungey has studied for 2½ years to complete the prerequisite classes she needs to transfer into a nursing program at Southern Oregon University.

However, a law recently signed by President Bush that reduces funding for student loan programs and boosts interest rates has Dungey questioning her plan.

"I’m wondering if I can go on to the nursing program," she said. "I rely on loans as the only way I can get by."

Two common educational loans for middle-class families — Stafford loans made to students and PLUS loans made to parents — will have a higher cost starting in July, thanks to Bush’s recent action. Another loan program, Perkins loans for lower-income students, doesn’t appear at all in the president’s proposed budget.

A $12.7 billion change in student loan programs Bush signed into law Feb. 8 takes effect in July.

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The White House calls the change "savings" to be accomplished over five years by eliminating government subsidies to lenders and locking in relatively high interest rates. Activist groups such as Oregon State Public Interest Research Group and Washington, D.C.-based Campaign for America’s Future call it "the largest cuts in history" to student loan aid.

The new law fixes interest rates, locking in one rate for the life of the loan, just as rates are rising. Previously both Stafford and PLUS loans were variable, adjusted each July to reflect current market conditions.

Since 2001, base interest rates have been low, giving students favorable rates and parents only slightly higher rates. For example, www.finaid.org, an online guide to financial aid, reported Stafford loan rates in 2004-05 were 3.37 percent and PLUS loan rates that year were 4.17 percent.

The current interest rate for Stafford loans is 5.3 percent and was expected to rise to around 6.8 percent this summer. The new law sets 6.8 percent as the permanent rate.

The current interest rate for PLUS loans is 6.1 percent and was scheduled to increase to 7.9 percent this summer. Under the new law it will increase to 8.5 percent.

The changes will force families to pay thousands more over the lives of their loans.

"Students are outraged," said SOU senior Monique Teal.

A criminology and sociology major from Portland, Teal has worked with a variety of student activist groups, including OSPIRG, to bring attention to the changes.

She notes that more than a third of students report they have unmanageable debt upon graduation and the increased interest costs will only make it worse.

"It can limit a student’s ability to continue to grad school," Teal said.

Scott Chadick, a loan officer in SOU’s financial aid office, estimates about 2,900 SOU students have loans that will be affected by the changes.

"It’s very dismal," said Debbie Beck, associate director of SOU’s financial aid office. "Nationwide, federal grants haven’t kept pace with tuition, so students have to borrow more. Loan indebtedness is soaring."

National Center for Educational Statistics reports that in 2003-04, the most recent figures available, 65.6 percent of undergraduate students graduated with some debt. The average federal student loan debt among graduating seniors was $19,202.

Despite working 30 hours a week and getting grants, Dungey worries she could amass a debt that would stifle her fledgling medical career. She went back to college 19 years after finishing high school and has other financial concerns.

"I’m a single mom and I have to take care of my kids," she said. "And I want to have something for my retirement.

"I’m a Republican and I voted for Bush. He said no child would be left behind, but students are being left behind. It’s sad. I think people need hope."

Reach reporter Anita Burke at 776-4485, or e-mail aburke@mailtribune.com.

How loan cuts impact finances

Stafford Loans

At the new rate of 6.8 percent, students will pay $7,619.31 in interest. Their monthly payments will be $230.16.

PLUS Loans

At the new rate of 8.5 percent, parents will pay $4,877.99 in interest. Their monthly payment will be $123.99.

— All calculations done on loan calculators available online at www.finaid.org.