One new emphasis at area colleges and universities is a focus on financial literacy and personal finance, especially as a result of the prospect of student loan interest rate increases and availability. Photo by Johnny Quirin
West Michigan students are safe for now, but local colleges are still uncertain about the future of financial aid legislation.
After congressional inaction to re-enact the legislation, the federal limit on student loan interest reverted to market rates. On Aug. 9, President Obama signed a bill into law restoring lower interest rates on student loans after negotiating new rules with legislators.
Grand Rapids Community College was closely following the news as it came out, said Ann Isackson, GRCC’s director of financial aid. After the bill was signed, the school posted the following on the financial aid page of its website:
“The U.S. Department of Education recently increased the student loan origination fees for Direct Subsidized and Unsubsidized loans and for Parent PLUS loans. These increases will take effect for loans first disbursedafter July 1, 2013. Due to federal sequestration, Subsidized and Unsubsidized origination fees will rise from 1 percent to 1.051 percent of the loan principal. Parent PLUS origination fees will rise from 4 percent to 4.204 percent of the loan principal.”
A decision by Washington is important for students to plan their education, Isackson said, adding the legislation is not unique for West Michigan students.
“What’s important to understand is they set a cap (8.25 percent), so each year the interest rate for the student is going to be tied to the treasury year,” she said. “It’s unlikely it would jump to that cap in one year. It is now a variable rate annually, but there is a cap for the interest rate for undergraduate loans, graduate loans and Parent PLUS. Caps for those other loans could vary.”
The early August action assured signature-subsidized loans and unsubsidized loans are at a low interest rate of 3.86 percent for undergrad students, said Michelle Rhodes, Grand Valley State University’s director of financial aid.
Obama’s action was a step toward passing regulations to make sure student interests rates stay low, she said, but the country still needs to find a sustainable solution to make education affordable.
A huge problem is that, for many students, loans are their only option they have for going to college, Rhodes said, and that means the government can essentially do whatever it wants with interest rates and students have to pay the price.
“I think sometimes the financial aid process can be overwhelming. Students see a loan and they realize it’s the only thing offered. It’s important congress recognizes that,” she said.
“Students will take loans whatever the interest rates are and we have to make sure we keep them low for the students, or students might choose to not go to college at all — and that’s definitely not the direction we want the state or the country to go in.”
At a local level, most colleges are trying to do what they can to educate students about financial aid, said Tina Hoxie, associate provost and dean of GRCC’s enrollment management, said GRCC has increased its First Year Experience course and other orientation programs’ focus on financial literacy.
GVSU also is trying to increase students’ financial literacy, Rhodes said. Last year, GVSU started MoneySmart Lakers, a program located in the Allendale Student Services Building designed to help students understand the college financial spectrum, including credit cards, loan insurance and everything financial-aid related.
GVSU also is looking to revamp its external college scholarship data-base, called myScholarships, she said, with plans to roll out a better searchable system by October.
“When parents send their students to college, almost 40 percent of the parents think it’s the job of the college to train their students in financial literacy,” Rhodes said. “And especially since we have so many first-generation students, we felt it was a social justice issue that we need to educate these students on how to use a checkbook.”