TOPEKA, Kan. (WIBW) -- College students' bank accounts are impacted not only by rising tuition, but now the threat that student loan rates could double. The 3.4% interest rate for a subsidized Stafford loan is set to increase to 6.8% on July 1, 2013.
Congress is now working on a proposal to keep rates where they are. CBS Money Reporter Alexis Christoforous said if the rate hike goes into effect, students with a debt of $27,000 would pay an extra $1,000 for each year of college.
The threat of an interest rate increase comes one week after state universities in Kansas got the okay to raise tuition from the Kansas Board of Regents. Washburn University's Board of Regents also approved a tuition increase of 5.33% at their meeting Wednesday night
"A lot of us are on financial aid and we don't really have the money to pay that extra."
Washburn student Kelli Thomas is one of thousands of American college students looking for ways to pay for school as tuition goes up. "A lot of us are on financial aid and we don't really have the money to pay that extra," she said. "You just have to find a way to budget what you have."
When the Fall semester starts, resident, undergraduate students at Washburn will pay $12 more per credit hour. That will increase it from $255 per credit hour to $267.
"Most of the money we receive from tuition increases and other sources we spend on people, we spend on faculty," said Dr. Jerry Farley, Washburn University President.
Dr. Farley says spending money in such a way helps keep the university competitive. He also said that between inflation and a reduction in state funding, how to pay for college has evolved in a way that puts more of the burden on students. "Now states are not putting as much money in and the burden is shifting from this being a public good and states paying for it, to it being viewed as a private benefit and students paying for it."
But, Farley says, financial, personal and community benefits make a college education a good investment. "We know they will earn, on average, depending on the discipline, more than a million and a quarter dollars in a lifetime than if they have a high school diploma," Dr. Farley said.
And students seem to recognize the benefits. Ava Tang participated in an exchange program with Washburn from China and chose to come back to Topeka to continue her education. "The experience to me is very important because I learn a lot of things and I met a lot of people," Ava said.
Dr. Farley says across the country, increases in tuition are directly proportionate to reduction in state funds. "From Washburn's perspective, over the past five years our cumulative increase has been about 21%. The inflation over the last five years has been about 18%. The state has reduced our budget by about 7 to 8%. So, it really comes out to loss in Washburn's case."
He also says that the university likely could afford not to raise tuition next year, but it would mean an even bigger increase for the school year starting in 2014. "Our philosophy has been that we would prefer to have modest annual increases in tuition, rather than having peaks and valleys."