Without Congressional action, interest rates on subsidized Stafford loans are set to double from 3.4% to 6.8% this July 1. Legislation to maintain the federal student loan interest rate at 3.4% for an additional school year is currently under consideration. Both Democrats and Republicans have acknowledged the need to keep rates from rising. The issue now is how to pay for the cost of keeping rates low for one year.
Used to be families did not have to take out huge loans to pay for going to college. Robert Reich explains it this way in a May 18 letter to the class of 2012:
For many of you, your immediate problem is that pile of debt on your shoulders. In a few moments, when you march out of here, those of you who have taken out college loans will owe more than $25,000 on average. Last year, 10 percent of college grads with loans owed more than $54,000. Your parents have also taken out loans to help you. Loans to parents for the college educations of their children have soared 75 percent since the academic year 2005-2006.
Outstanding student debt now totals over $1 trillion. That’s more than the nation’s total credit-card debt.
The extraordinary rise in student debt is due to two related facts: the cost of a college education continues to increase faster than inflation, and state and local spending per college student continues to drop – this year reaching a 25-year low.
Isn’t keeping the interest rate at 3.4 percent the least our government could do for students? You might think so except late last month, the House majority pushed through legislation that would prevent the rate hike by gutting the Prevention and Public Health Fund in President Obama’s Affordable Care Act. Somebody please explain why women’s access to preventive health care should be tied to student loans?
So while college students are graduating with record levels of debt and high levels of unemployment for graduates, Congress plays politics with their debt.
Ask Congress to Stop the Student Loan Interest Rate Hike Act of 2012 (S. 2343).