College students and their families are just a few weeks away from seeing their student loan costs jump by hundreds to thousands of dollars. A few months ago, Congress passed a deficit reduction bill that made the biggest cuts in federal student loan program history—$12 billion. Under that bill, as of July 1 interest rates for most loan programs will jump by 1 to 2 percentage points, up to a maximum of 8.5 percent. The money those hikes generate, which come at the expense of low- and middle-income students and working families, will help pay for tax cuts for the wealthy, a fact that seemed not to trouble the Republican controlled Congress.

In fact, the needs of another worthy interest group—Sallie Mae and the private lenders—took up the attention of the appropriations committee, which was being urged by House Education and Workforce Committee chairman Rep. Howard "Buck" McKeon (R-Calif.) to "fix" an oversight in the earlier bill. The lenders wanted Congress to include direct loans to parents in the interest rate hike, a class of loans accidentally left out of the deficit reduction bill. The banks and private lenders worried that if the direct loans didn't have the interest rate hike too, the private lenders would end up at a disadvantage. (No matter that direct loans have been proven again and again to save money for both students and the American taxpayer.) The AFT, which is part of a "Stop the Raid on Student Aid" coalition, vigorously opposed making this fix and the committee ended up dropping it, for the time being.

Check Out Loan Consolidation through AFT + Member Benefits
July 1 is also the deadline for student and their families to consolidate their loans. After that date, consolidation options become seriously limited for current and future borrowers. Loan consolidation allows students to pay off current loans that may have variable interest rates, and assume one new loan at a lower, fixed rate.

AFT members can take advantage of an AFT + benefit program to consolidate their loans. It takes just 10 minutes to fill out the application at http://www.aft.org/aftplus/financial/consolidation.htm. [Gabriella Gomez, Barbara McKenna]

June 8, 2006