On Monday, 20-year-old Gillian Ellison of Missoula visited with University of Montana financial aid specialists to hash out how best to finance her college education.
"It's really daunting," said the incoming freshman, who hopes to earn a bachelor's degree in Environmental Studies.
Incoming freshmen are facing more significant hurdles financing a college education than at any other time in recent history. Statistics show Montana University System students borrow more money now than their predecessors five years ago; 2013's graduating class had an average education debt of $25,000, or $4,000 more than in 2008. Similarly, a June 18 congressional report shows that student loan debt has nearly doubled nationally during the past five years, increasing from $550 billion in 2007 to just under $1 trillion this year.
Ellison is especially frustrated because if Congress doesn't act soon, she'll be forced to pay even more. On July 1, the interest rate for subsidized Stafford loans, which are designed to serve students with financial need, is slated to double, from 3.4 percent to 6.8 percent. This week's congressional report shows that the interest rate hike will stick students who borrow the maximum amount allowed under federal subsidized Stafford loan guidelines with an additional $4,500 tab.
To head off the impending interest rate hike, lawmakers are debating several alternatives, including a complete overhaul of student loan interest rates, potentially making them variable, rather than fixed. One such plan would set rates at 4.7 percent this year, with future increases on the horizon. President Obama, meanwhile, supports tying rates to those attached to the 10-year U.S. Treasury bond and tacking on an additional .93 percent, meaning that the rate attached to a loan taken out now would actually fall by roughly .27 percent.
In Missoula, UM Financial Aid Director Kent McGowan says that 6,700 UM students have signed up to receive an unsubsidized Stafford loan in 2013. "To the tune of about $25 million," he says.