Interest rates increase on college loans

October 1, 2008 5:50:06 PM PDT
Interest rates on federally insured loans for college students are going up.Wednesday companies offering federally insured college loans announced an interest rate increase from 4.5 percent to 5.75 percent.

The average North Carolina college student will owe $14,000 with the new hike.

It means graduates will pay about $9 more a month, but over ten years, it will add up to another $1,000 in interest.

However, students are not getting squeezed because of non-payments.

The College Foundation of North Carolina which loans the money has to protect itself, says the increase stems from the Wall Street crisis.

The foundation has enough money, but it cannot find investors. They say they are now banking on the government to step up as the last resort. So rates must go up as a safety net.

NC State student Katrina Reimer a biological engineer major from Fayetteville is facing $15,000 in student loans. She and other students say they are not following the rollercoaster money market. They say it's not fair the Wall Street crisis is hitting campuses.

Some economic experts at Duke University say they wouldn't mind if the new rescue plan fails.

The Wall Street crisis and the fallout were the focus topic of the university president's first forum on critical issues.

"What is the cost going to be to the treasury and making sure you do the bailout the right way," Duke Economics Professor Craig Burnside said.

To the ire of most students in the crowd, the cost will come at their expense.

"The responsibility and the weight of this is going to be felt more by future generations than necessarily the people who got us involved in it," Duke freshman John Deans said.

"It seems to me that it's more of a short term prospect so it will hurt me in the long-run either way," Duke sophomore Michael Warady said.

The more immediate concern for students could be a lending freeze that would make it impossible to get a student loan.

"I have student loans and yeah if I'm not, I understand that if people can't get loans they're not going to be able to afford college like we are now, especially an expensive college like Duke," Warady said.


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