(Corrects Stam's university in seventh paragraph to Georgetown
University, not George Washington)
By Elvina Nawaguna
WASHINGTON, Sept 6 Before leaving for its August
recess, Congress hammered out a deal that moved federal loan
interest rates for undergraduates and graduate students to a
market-based system from a fixed rate.
But advocates for graduate students want lawmakers to alter
that legislation because, they say, it sets the stage for a
spike in student loan interest rates.
While the new system meant an immediate drop for graduate
students - to 5.4 percent from 6.8 percent - it also meant rates
could rise to a cap of 9.5 percent, as the economy improves.
Graduate students fear rates could quickly hit the cap as the
economy improves, saddling them with more debt.
This concern is reinforced by the recent jump in Treasury
yields as the Federal Reserve prepares to taper its bond-buying
program, which has kept borrowing costs low.
The government issues 93 percent of U.S. student loans, and
millions of graduate students rely on federal Stafford loans.
Cristina Stam, a first-year graduate student at Georgetown
University's law school, said the thought of interest rates
spiking while she is enrolled weighs on her.
Stam, 25, borrowed $30,000 this year and said she could wind
up with $90,000 in debt when she graduates three years from now.
Higher rates could add thousands more.
"I would hate for that to happen. I'm married. I can't ask
my parents for money," Stam said.
Graduate students are crying foul, especially because
undergraduates got a lower cap of 8.25 percent.
"There has been a large focus on undergraduate education -
which we support - but it definitely feels like there has been a
marginalizing of graduate students in terms of student loans.
Over the long term, it's going to be a disaster," said Meredith
Niles, director of legislative affairs at the National
Association of Graduate-Professional Students (NAGPS).
Students want their grievances to be part of the discussions
as lawmakers debate the reauthorization of the Higher Education
Act, which lays out guidelines for distributing federal student
The NAGPS will lead a delegation of its members to Capitol
Hill on Sept. 16-17 to directly address legislators. The Council
of Graduate Students (CGS) has also submitted recommendations to
Congress and plans to coordinate hearings with other student
groups and lawmakers in coming weeks.
According to the College Board, graduate students in the
2011-2012 academic year received $34.5 billion in federal
student loans, accounting for 67 percent of aid disbursed to the
nation's 3.9 million graduate students that year.
Graduate student groups want legislators to cap interest
rates at 6.8 percent, and revive a subsidized loan program that
allowed graduate students to complete school before starting
It is unclear whether they will make much headway.
Lawmakers behind the bipartisan-backed law said it was a
matter of choosing where to place limited subsidies to encourage
at least an undergraduate degree.
A senior Republican aide on the Senate Committee on Health
Education, Labor and Pensions told Reuters that the caps had to
be higher on graduate students so the government did not have to
subsidize those rates.
"This was a result of a compromise, a negotiation," the aide
said. "There are winners and losers."
Student debt and college affordability have become a larger
part of a national conversation as outstanding student debt has
reached $1.2 trillion in the United States and as default rates
steadily rise. More than 10 percent of outstanding student loans
are considered delinquent.
Graduate students say their financial burden should not be
higher than undergraduates, explaining that they often are
non-traditional students - many are married, have children or
other financial obligations such as undergraduate loans or
"Unlike undergraduates, we're no longer dependent on our
parents," said Niles, a PhD candidate at University of
California-Davis. "When we see these higher rates, it's not just
students it affects. It affects families."
Graduate students leave school with student debt load
ranging from $30,000 to $120,000, according to FinAid.org.
Undergraduates have an average of $27,000.
Graduate students also argue that higher-level education is
becoming more of a necessity and a driver of economic growth.
The U.S. Department of Labor forecasts a 22 percent rise in
jobs requiring at least a master's degree between 2010 and 2020,
and a 20 percent rise for jobs requiring doctorates.
"There's an undeniable payoff in economic growth and
innovation that comes from graduate education," said CGS
President Debra Stewart. "We need undergraduate education and
graduate education, and we need to be supporting both."
(Editing by Karey Van Hall and Douglas Royalty)