(Washington D.C.)- With the average student borrower accumulating a record $17,500 in debt and tuition and fees soaring 40% at four-year public colleges since 2001, U.S. Rep. Sander Levin (D-Royal Oak) today slammed the Republican cuts to the federal student aid program that take affect July 1st. The Republican Raid on Student Aid was passed this past February as part of the misnamed Deficit Reduction Act of 2005, where the $12 billion cut from student aid programs was used to pay towards the $70 billion in tax cuts for the very wealthy. The rate increases be felt acutely by families in Michigan and across the country.

"The Republican Majority's graduation present to high school seniors across Michigan is a substantial rate hike on their student loans," said U.S. Rep. Levin. "We should be making college more affordable for our college-bound students, not build a wall in front of them."

The table below lists the increases parents and students will face when taking out a new loan as a result of the Republican aid cuts. Direct Loans (DL) are loans directly through the Department of Education, while Federal Family Education Loans (FFEL) are administered through independent lenders. Parents of undergraduate students can borrow money through the Parent Loans for Undergraduate Students (PLUS) program.

          Rates                                             NEW LOANS
                                           STUDENT LOANS          PLUS LOANS
                                               DL        FFEL               DL          FFEL

        Current                          5.30%     5.30%            6.10%      6.10%

  On or After July 1, 2006       6.80%     6.80%            7.90%       8.50% 

"Cutting student aid assistance proves how upside-down the priorities of the Republican-controlled Congress have become. The Republican plan makes it more difficult for Michigan families to send their kids to college while pushing student and parent borrowers further into debt."

"Democrats continue to fight to cut student interest rates in half - an investment that would save the average student $5,600. But in this Republican-controlled Congress, students continue to take a back seat to tax cuts for the very wealthy," concluded Levin.

House and Senate Democrats have proposed a real solution that would cut interest rates in half on subsidized student loans and parent loans for undergraduate students. Under this plan, the average student would save $5,600 over the life of his or her loans - money they can use to pay their bills or support their family following graduation.

Consolidation rates will also increase on July 1. Any borrower can consolidate his or her existing loans to only have one monthly payment, lock in a low fixed rate, and extend the repayment period of the loans, decreasing the month payment. In most cases borrowers may only consolidate once. Consolidation loan rates are based on the weighted average of all the interest rates on the loans at the time of consolidation, rounded up to the nearest one-eight of a percent. After July 1, the rate for consolidation loans will continue to change based on the variable interest rate of loans taken out prior to July 1. Republican hikes to student aid will therefore adversely affect consolidation rates.

This July 1, the changes in consolidation rates are as follows:

      Rates                                  CONSOLIDATION LOANS
                                       STUDENT LOANS       PARENT LOANS
    Current                                5.30%                         6.10%
 On or After July 1, 2006           7.14%                         7.94%

(####)

Home Page  |  Press Releases