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student debt

GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

This post was written by Hatchet staff writer Avery Anapol.

Students who take out federal loans will face even steeper fees next fall as interest rates surpass 5 percent.

Undergraduates will have to pay 30 percent more in interest compared to last year after a new law goes into effect tying interest rates to the 10-year Treasury note, Vox reported Wednesday.

The jump is still far less than the increase that would have gone into effect without last year’s stopgap legislation – though the interest rates will rise past 7 percent over the next four years, according to estimates released this week by the Congressional Budget Office.

This year, interest rates will rise to 5.04 percent from 3.86 percent in the 2013-2014 academic year.

Interest rate increases have faced opposition from Democrats. Led by President Barack Obama, activists and students launched the “Don’t Double My Rate” campaign last year.

At $33,399, the average debt load for GW students is higher than the national average of $29,400. But only 1.5 percent of students default on those loans, which is well below the national average.

The good news: federal student loans are subject to a fixed rate. For students who have already taken out their loans, their interest rate will not increase.

Congress will have the chance to change the law again this year, but its unlikely to lower interest rates as the government is projected to possibly make billions of dollars on student loans over the next decade.

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GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

GW students graduated in 2012 with an average debt of $33,399. Hatchet File Photo.

An Al Jazeera report published Tuesday brought attention back to GW’s controversial practice of suing alumni who default on their student loans.

GW sued more than two dozen former students in 2012 for repeatedly missing loan payments, making the University one of four East Coast schools – including Yale University and the University of Pennsylvania – that have brought the issue to court.

The Al Jazeera report features a 32-year-old GW business school alumnus, David Acevedo, who has struggled to pay back his loans since he enrolled in 1999.

He was ordered to pay $7,050 by a D.C. court last year – up from $3,084 in 2004. Those costs included his Perkins loan, plus interest, attorney fees and court costs, Acevedo told Al Jazeera.

“For many years I simply ignored it and swept under the rug the letters or the demands for the money for pragmatic reasons. I was totally out of money,” he said.

He now lives and works in Manhattan, but still doesn’t make enough to drive away GW legal team.

And Acevedo will not be the last one to see court orders because of his loans: experts say the practice will likely become even more prevalent amid rising student debt loads nationwide.

Student debt totaled $1.2 trillion in 2013, according to the Consumer Financial Protection Bureau, now surpassing credit card debt. And as student debt has swelled, so have loan defaults, with the percent of borrowers who can’t make their payments now reaching into the double-digits.

GW’s lawsuits against former students first came in the news last February, after a report by Bloomberg News that also featured Yale and UPenn.

The average debt load for GW graduates in 2012 was $33,399, though GW students’ default rate remains low at about 1.5 percent.

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Senior Sam Nelson, a leader of GW’s Progressive Student Union, was glad to see President Barack Obama advocate for lower interest rates on student loans Friday at the White House.

Senior Sam Nelson, back left, stood behind President Barack Obama during a White House press conference on student loans, earning screen time on national networks including MSNBC and PBS. Photo courtesy PBS NewsHour

But Nelson, who has rallied around student debt issues for years, was also center stage for the speech, meeting with the president beforehand and standing behind Obama as he spoke to national television cameras.

Nelson, who has already racked up $42,000 in debt, described the president as “very down to earth and relaxed” and said Obama shook hands with each student and asked where they were from and what college they attended.

Nelson got to the White House stage with a knack for advocacy. After protesting outside the headquarters of the student loan giant Sallie Mae last year – demanding an audience before shareholders and a meeting with the company’s CEO – the activists joined shareholders at their meeting on Thursday.

And after voicing their concerns to shareholders, Sallie Mae’s newly elected CEO Jack Remondi agreed to meet with the group of activists, and Nelson said he will be a part of the delegation.

“You feel the connection when you see that the work we do in organizing really has far reaching ramifications. And that’s a good feeling,” Nelson said.

With interest rates on federally subsidized Stafford student loans set to double in July, the president urged Congress to keep the lending rate at a locked-in 3.4 percent. He also railed against a House of Representatives bill that would allow rates on new subsidized Stafford loans to float.

And, in the beginning of his remarks, he said he enjoyed meeting with students.

“One of my favorite things about this job is that I get to spend some time with remarkable young people from all across the country,” Obama said. “It inspires me.”

In the meeting before the press conference, Obama told the students to keep up their activism and continue to put pressure on Congress, Nelson said.

“[The interest rates] didn’t double last year because students got out and we mobilized to stop it,” Nelson said. “We know about these problems, we know what they can do to people and families and we want this to end, this petty bickering over interest rates.

This post was updated May 31, 2013 at 7:59 p.m. to reflect the following:

Correction appended

The Hatchet incorrectly reported that Sam Nelson was the head of GW’s Progressive Student Union. In fact, he is on the coordinating committee. We regret this error.

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The House of Representatives voted Thursday to allow student loan interest rates to float with the free market, as lawmakers stare down a July 1 deadline when rates would double for undergraduates.

The Republican-backed measure, HR 1911, which passed mostly along party lines, would reset the rates for both subsidized and unsubsidized Stafford loans each year. The Congressional Budget Office projected rates would rise from their current 3.4 percent to 5 percent in 2014 and 7.7 percent in 2023.

Speaker John Boehner, R-Ohio, said the Republican-controlled House was taking action to deal with increasing student debt loads. Democrats, however, say Thursday’s measure would create too much volatility for student borrowers. Photo courtesy of the office of the Speaker of the House

“What the House is doing today is a responsible way to deal honestly with the issue of student loans,” Boehner said, according to news reports.

The bill is looking to stave off a doubling of rates for new subsidized Stafford loans later this summer if Congress does not act – an option neither party favors.

However, the measure now faces an unwelcoming Senate vote and a potential veto from President Barack Obama – likely pushing the student loan fight into the summer. Democrats in the Senate, who say the House measure creates too much unpredictability for interest rates, want to extend the current rate to give them more time to create a new formula.

The debate has an impact on a large swath of GW students, as about 4,700 undergraduates received more than $30 million in funding from subsidized Stafford loans last year. Borrowers’ monthly payments, however, would only increase slightly, if rates double to 6.8 percent this summer.

The Class of 2012 borrowed an average of $33,399 to earn their diplomas – nearly $9,000 more than 2011’s national average.


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SA runoff, John Richardson

Student Association President John Richardson signed a petition Tuesday to ask Congress to stop the interest rate on Stafford loans from doubling this summer. Hatchet File Photo

The Student Association’s leader signed a petition Tuesday calling for Congress to address mounting student loan debt.

President John Richardson was one of 200 student government leaders from colleges nationwide to sign the letter urging congressional leaders to pass legislation that would prevent the 3.4 percent interest rate on Stafford loans from doubling this summer.

He said the petition was “in line with the work that I’ve been trying to do all year to keep cost of attendance down.”

The letter discusses the growing concern among students about the cost of higher education, highlighting that one out of every two graduating students are unemployed or employed at a job for which they are over-qualified.

“There has long been a promise that, if a student goes to college, works hard, and does well, they will have a more prosperous future ahead of them,” the letter reads. “Student loan debt is severely undermining that prospect.”

GW students typically graduate with about $32,500 in debt – higher than the average of $25,250 that 2010 college graduates accrued, according to the most recent data available from the Project on Student Debt.

“I’m not sure how many of our grads have jobs yet, but no one wants to have this much debt,” Richardson said.

The National Campus Leadership Council, a coalition of student government presidents from across the country, spearheaded the push for signatures.

Representatives from Georgetown, American, Howard and Catholic universities also signed the petition.

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Director of the Consumer Financial Protection Bureau said the new website would better inform prospective college students of the financial implications of their decisions. Photo used under the Creative Commons License.

Federal efforts to demystify the cost of college moved forward today with the release of an online college comparison shopper.

The Consumer Financial Protection Bureau launched the Financial Aid Comparison Shopper to allow prospective students to to compare the financial implications of attendance at institutions where they were accepted. The effort is another step in a series of federal programs to break down universities’ sticker prices and financial aid packages.

The website allows students to enter up to three colleges, then spits out the sticker price, average scholarship package and estimated monthly loan payments at each, with an option to input the user’s exact financial aid offer. It also provides the same information for the average public and private universities as additional points of comparison.

The tool will not estimate total debt burden upon graduation, according to its website.

Student loan debt nationwide likely crossed the $1 trillion threshold late last year, although revised estimates only acknowledged the mile marker last month, the Wall Street Journal reported March 22. Many have since warned that the student debt bubble could be an impediment to overall economic recovery, preventing college-aged borrowers from being able to afford a home or qualify for a mortgage.

The average graduate left college with $25,250 in student loan debt in 2010, according to the most recent data from The Project on Student Debt – a figure the typical GW student topped by more than $7,000.

“Now more than ever, students and their families need to know before they owe. Our Financial Aid Comparison Shopper helps students make apples to apples comparisons of their offers and pick the one that works best for their financial future,” Richard Cordray, the bureau’s director, said in a release.

The new website is part of the “Know Before You Owe” campaign, which was first announced in November. The bureau opened in 2011 in response to the economic crisis.

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President Barack Obama, HIV, AIDS

President Barack Obama addressed college affordability and access in his third State of the Union address Tuesday. Hatchet File Photo

This blog post was written by Hatchet Reporter Mary-Ellen McIntire.

President Barack Obama emphasized the importance of education in solving the nation’s challenges in his third State of the Union address Tuesday.

Obama also noted the rising cost of college attendance and called on lawmakers to provide financial relief to students.

He urged Congress to stop interest rates on student loans from doubling, as they are set to do in July, and to permanently extend the tuition tax credit his administration created.

The president also called on Congress to double the number of Federal Work Study jobs in the United States over the next five years. GW faced $400,000 in federal funding cuts for work-study positions last semester, forcing departments to pay a higher percentage of student salaries – a unique move as peer universities chose instead to slash the number of  jobs available.

“States also need to do their part by making higher education a higher priority in their budgets,” Obama said.

He called on colleges and universities to keep tuition costs down, warning, “If you can’t stop tuition from going up, the funding you get from taxpayers will go down.”

Obama said he has met with a group of college presidents whose schools had successfully lowered tuition. Some colleges redesigned courses to help students graduate quicker, he said.

Students opting to save money by cutting their final semester has been a trend at GW, although statistics are not available because the University does not officially track students who leave a semester early.

“Higher education can’t be a luxury,” Obama said. “It is an economic imperative that every family in America should be able to afford.”

Obama also addressed the importance of pre-college education.

While tight budgets have forced states to fire thousands of public school teachers, Obama said that a good teacher can increase the lifetime income of students.

“Give them the resources to keep good teachers on the job, and reward the best ones. And in return, grant schools flexibility: to teach with creativity and passion; to stop teaching to the test; and to replace teachers who just aren’t helping kids learn.”

Obama also proposed that every state require all students to stay in high school until graduation or until they turn 18 years old.

“When students are not allowed to drop out, they do better,” Obama said.

The emphasis on education policy in the national address is a continuation of Obama’s “We Can’t Wait” campaign. Launched last October to address student debt, University administrators said few GW students would benefit from the plan.

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The debt deal passed by Congress and signed into law today will step up Pell Grant funding in exchange for putting federally subsidized loans for graduate students on the chopping block.

The Budget Control Act of 2011 will not touch President Barack Obama’s $5,550 maximum Pell Grant award per undergraduate student and pours $17 billion into the program’s funding by 2015, but cuts the federal subsidy that previously reprieved graduate students from accruing interest on their loans while still in school.

About 11 to 12 percent of GW undergraduates receive Pell Grant awards in their financial aid packages. Associate Vice President for Financial Assistance Dan Small said in February more than 1,390 students received Pell Grants this year.

Congressional Budget Office estimates show the new measures will boost direct spending by $7.4 billion over the next four years but ultimately reduce spending by $4.6 billion by 2021.

Beginning July 2012,  graduate students with subsidized loans will not receive subsidies on their interest, making the students accountable for interest that builds up while they are in school to trim government spending by about $21.6 billion by 2021, according to the CBO. The bill also prevents the Department of Education from incentivizing on-time repayment of loans through programs, such as one that offers partial rebates for certain fees students incur during the loan process.

Graduate students who make payments automatically debited from their bank accounts will still receive interest rate reductions.

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