Pressure mounting on Congress to keep down student loan interest

The pressure is mounting on the U.S. Congress to act to keep down interest rates on federal Stafford loans, which are helping  225,000 Georgia students attend college. A critical vote will be held Tuesday on the interest rate on those loans, which will double if Congress does not intervene.

In a conference call today, Georgia PIRG said the doubling of the interest rate from 3.4 percent to 6.8 percent on new student loans — students have to reapply every year for the loans — will push up the college loan debt load, which already exceeds credit card debt in the United States.

The average Georgia student could see an additional $913 in repayment costs if the federal loans carry an interest of 6.8 percent. The average Georgia student graduates with nearly $19,000 in debt now.  (That is less than the national average, which is $25,000.)

“We see students every day with financial need who keep struggling over how they are meeting college expenses,” said Philip E. Hawkins , associate director of financial aid at Kennesaw State University. “They struggle with not only how they are doing meeting the costs, but, fast forward to when they graduate, how they are going to pay those loans.”

According to Georgia PIRG:

Higher education advocates released new data today showing that an anticipated increase in the student loan interest rate would cost Georgia students $200 million per year. The increase would affect federally subsidized Stafford loans, which are provided to almost 7.5 million low and moderate-income students nationwide each year. If Congress does nothing, then beginning on July 1st, the interest rate will double from 3.4% to 6.8% on new student loans.

“In today’s economy, students need a college education to get ahead,” said Rich Williams Higher Education Advocate for Georgia PIRG. “Doubling the interest rate for student loans would make this goal harder to achieve for thousands of Georgians.”

The average student borrower already graduates with over $25,000 in student loans. On average, the doubling of the interest rate would add approximately $1,000 for every year a student takes out a loan, adding up to more than $4,000 over a four-year education. To stave off the rate hike, Congress needs to act by July 1st to maintain the existing interest rate. Without action, interest rates on these loans will double, resulting in significant new debt for future graduates. A vote on the issue is schedule in the United States Senate for Tuesday.

“With college costs increasing and available financial resources decreasing, student loans are becoming an inevitable option for students to pay for college,” said Ron Day, Financial Aid Director at Kennesaw State University.

In comments today on the student loan crisis, President Obama told high schools students in Virginia:

Now, I want to give you guys some relief from that debt.  I don’t want you to start off life saddled with debt.  And I don’t want your parents to be taking on so much debt as well. Because when you start off already owing a lot of money graduating from school it means making a lot of really tough choices, like maybe waiting longer to buy a house, or to start a family, or to chase that career that you really want.

Now, Congress also has to do its part. Right now, that means preventing the interest rates on federal student loans from doubling, which would make it harder for you to pay for college next year. The three classmates of yours that I met, they’re all getting Stafford loans to help pay for college. And these Stafford loans, right now, have a very low interest rate, because five years ago Congress cut the rate for these student loans in half.  That was a good idea.  It made college more affordable.

But here’s the bad news — on July 1st — less than two months from now — that rate cut expires, and interest rates on those loans will double overnight. That’s not good. For each year that Congress doesn’t act, the average student with these Stafford loans will rack up an additional $1,000 in debt.  That’s like a $1,000 tax hike for more than 7 million students across America.

You guys shouldn’t have to pay an extra $1,000 just because Congress can’t get its act together. This should be a no-brainer. This is something that we need to get done.

–From Maureen Downey, for the AJC Get Schooled blog