While college students are taking the summer off from schoolwork and exams, politicians in Congress are frantically doing some writing of their own — legislation — on how to prevent loan interest rate costs from increasing.
The interest rate on federally subsidized Stafford loans is currently at 3.4 percent, but it is set to revert back to 6.8 percent July 1, the rate it was before the 2007 College Affordability Plan gradually lowered it.
According to consumer group PennPIRG, each Pennsylvania student with a Stafford loan would have a $956 hike in debt if the rate doubles.
That’s an extra $358 million for 374,328 students across Pennsylvania.
Temple University Student Government President Darin Bartholomew said loans should make college more accessible but instead they are burying students in debt.
“I think what students want, especially on my campus, is a real long-term solution that allows some sort of certainty to this," Bartholomew said. "High school seniors are making the biggest decisions of their lives based on borrowing information that isn’t really secure from one year to the next. We keep kind of kicking this can down the road from year to year.”
According to PennPIRG, the average Pennsylvania college graduate currently has $29,959 in student debt.
“That money could be used for any number of things including saving up for down payments on homes, on saving up for weddings, forming a family, paying off other consumer debt they may have amassed during college, but otherwise injecting it into the consumer economy of the state,” said PennPIRG advocate Mike Russo.
Russo said student loan programs are expected to generate $50 billion for the federal government in the 2013-2014 year.
“But that revenue comes at the expense, too often, of student borrowers who can go deeper into debt as a result," Russo said. "And so an increase in the student loan interest rate would allow the federal government to increase its revenue in the short run but would add to the debt-load of the next generation.”
According to Russo, 60 percent of jobs are expected to require a bachelor’s degree by 2020.
“Despite the number of unemployed workers looking for jobs right now, the lack of an educated workforce is a major problem, and it’s only going to get worse,” Russo said.
Several proposals to avert doubling the interest rate have been presented, but there has not been agreement on any one plan.
PennPIRG supports a plan proposed by Sens. Tom Harkin (D-IA) and Jack Reed (D-RI) that includes a two-year extension of the 3.4 percent rate paid for by closing corporate tax loopholes.