By EDWARD HUSAR
Herald-Whig Staff Writer
With interest rates on subsidized student loans expected to double July 1 unless Congress takes some action, many college students could face a big financial hit.
Rebecca McCollum of Quincy is bracing for the worst.
McCollum will receive an associate's degree in biology this spring from John Wood Community College. She will then transfer to Western Illinois University in Macomb, where she has been accepted into the pre-med program.
McCollum has six more years of school in front of her, including four years of medical school after earning a bachelor's degree from WIU.
"Unless Congress takes action, my student loan debt is going to go up exponentially," she said.
The Associated Press recently reported that student loan debt could rise nationally by $6 billion if Congress allows the interest rate for subsidized Stafford loans to increase from 3.4 percent to 6.8 percent on July 1. The AP said congressional inaction could cost college students an extra $5,000 on loans.
"It's not going to be $5,000 more for me," McCollum said. "It's going to be a lot more."
McCollum, who wants to become a psychiatrist after finishing medical school, said she wouldn't be surprised if she accumulates $250,000 or more in student loan debt by the time she enters the workforce. So doubling the student loan interest rate will have a major impact.
"That means it's going to take me longer to pay that money back. And while you're paying that money back, you're still accruing interest on the loan," she said. "It's no different than a credit card bill. You have this large amount of money (that must be repaid with interest). It's like you're digging to China."
The impending change in student loan rates only applies to subsidized federal loans, which are tapped frequently by new and continuing college students. In 2007, Congress lowered the subsidized rate from 6.8 percent to 6 percent for loans during the 2008-09 academic year. The rate then fell to 5.6 percent in 2009-10, 4.5 percent in 2010-11 and 3.4 percent in 2011-12. Meanwhile, the unsubsidized rate remained at 6.8 percent.
Last year, the subsidized rate was slated to return automatically to 6.8 percent. But Congress decided to keep the rate at 3.4 percent for another year. The expiration deadline is now approaching again, and the rate will automatically rise to 6.8 percent unless some legislative action is taken.
Several congressional proposals have been discussed to keep the rate at 3.4 percent permanently or on a short-term basis, but there is no guarantee Congress will take action.
Lisa Flack, director of financial aid for Quincy University, said if the rate reduction is allowed to expire and the subsidized rate returns to 6.8 percent, many college students nationwide will be affected.
"It will impact anybody that's taking out a loan for this upcoming year, but it won't impact their previous loans," she said.
Flack said the estimated $5,000 cost figure cited by AP likely applies to students who will pay back their loans over the customary 10-year period after graduating. But not every student follows the 10-year payback routine.
"If a student did more than the 10-year and went to a 15-year, you can imagine it would make quite a big difference" in their total loan cost, Flack said.
"We encourage students to borrow wisely -- to think about not just borrowing what they are eligible for, but to look at their needs and not their wants," she said.
"We encourage students to apply for outside scholarships and for scholarships within the school. We encourage them to find part-time jobs, either on campus or off campus, and to save."
Melanie Lechtenberg, dean of enrollment services and director of financial aid at JWCC, agrees a doubling of the subsidized student loan rate "would have a big impact" on many students.
"With the economy the way it is, we have lots of students who take out student loans," she said. "They're going to accumulate debt quicker."
McCollum, a 37-year-old Navy veteran, is a nontraditional student with a practical outlook on her long-range finances.
McCollum said she is purposely planning to accelerate her college education so she can get done quicker and pay off her loans sooner. That means packing in more courses over a shorter period of time -- like she did last summer when she took 11 credit hours of classes, which is the equivalent of taking 22 credits during a regular semester.
"Students are going to have to get smarter with time management. I mean, you can't wring more out of a dollar. And if Congress doesn't pass this (rate extension), students are going to have to figure out a way to do the most with what they have in however many hours a day," she said.
McCollum is already plotting a hectic schedule for next fall when she becomes a full-time WIU student. She plans to commute to Macomb by train three days a week and use the train ride as a study period. She also plans to take an additional science class at JWCC two days a week to help expedite her credits while holding down her costs.
Meanwhile, she will be striving to spend time with her 14-year-old son, a student at Quincy Junior High. She wants to be available whenever possible to help him with his homework.
"I have a significant amount of homework myself," she said.