It’s a race against the clock to see if millions of students will return to college for the fall semester saddled with additional debt.
A July 1 deadline to renew a fixed 3.4 percent rate on Stafford loans — which is made available to low income students — expired, and students now face a 6.8 percent rate on new loans.
This means undergraduate students may face rates twice as high on federal student loans than what they paid last year.
The majority of Democrats want to extend the 3.4 percent interest rate on loans another year, while Republicans and a handful of Democrats argue the interest rate should be linked to the financial market.
A deal to lower the interest rates on student loans hit a hurdle Thursday after lawmakers discovered it would cost $22 billion over the next 10 years.
Currently, the subsidized federal loans account for about one-third of all student borrowing, and it means students who step foot on campus this fall will face an additional $2,600 more in loans than when they left last spring.
While senators squabble in Washington, it’s students (and their parents who pay for their child’s college education), who will ultimately pay for Congress’ absent actions.
According to a June report by Congress’ Joint Economic Committee, two-thirds of recent graduates have student loan debt, at an average balance of $27,200 — 60 percent of a young, college graduate’s earnings.
According to a study by Hamilton Place Strategies, student loan debt is projected to exceed the annual median income of college students by the year 2023.
While it’s obvious to us an increase in student loan debt will be a financial burden to college students and their families, we wonder if there is a larger issue at hand: The runaway costs of attending a four-year university.
According to the U.S. Department of Education, between 2000-01 and 2010-11, prices for undergraduate tuition, room and board at a public university rose 42 percent after adjustments for inflation.
Most 18-year-olds are not savvy enough to understand their financial future.
They live off of credit cards with high interest rates, students loans (which don’t get wiped away with a bankruptcy) and part-time jobs. Oh, and paid internships are increasingly becoming a thing of the past.
After graduating college — saddled with tens of thousands of dollars in debt — is it realistic to have young adults live the American Dream? Do we expect them to be able to manage obtaining a job, paying off their debt, saving for a down payment on the house (and subsequent mortgage payments), and then have enough left over to start a family and raise children? And let’s not forget that all of these are vital for our economy.
It’s in our nation’s best interest to invest in our young people, not sign them up for a long life of loan repayments before they can get out of the starting gate at the age of 22.