Read

Error message

Notice: Undefined index: base_url in include_once() (line 125 of /home3/occupyco/public_html/dev/sites/default/settings.php).

User menu

Search form

Student Loan Interest Rates Set to Double in July, Even As Debt Soars

Student Loan Interest Rates Set to Double in July, Even As Debt Soars
Thu, 4/18/2013 - by Aviva Shen
This article originally appeared on Think Progress

Student loan interest rates are scheduled to double on July 1, from 3.4 percent to 6.8 percent. Congress extended the lower rate on federal student loans for a year in an effort to control the nation’s formidable student debt crisis, but will now have to decide whether or not to cancel the interest rate hike once again.

The interest rate is a rare instance of bipartisan agreement; last year, both President Obama and GOP presidential candidate Mitt Romney promised to hold down interest rates on subsidized Stafford loans. Student loan rates have not been changed since they were set in 2001, even though student debt has exploded in the past decade.

The average student is now grappling with more than $27,000 in debt, and the national student debt has reached $1 trillion. Meanwhile, the federal government is making a profit on these interest rates, according to a brief by student advocacy groups:

"The brief, citing a February report from the Congressional Budget Office, said the federal government makes 36 cents in profit on every student-loan dollar it puts out, and estimates that over all, student loans will bring in $34 billion next year." “Higher education loans are meant to subsidize the cost of higher education, not profit from them, especially at a time when students are facing record debt,” said Ethan Senack, the higher education advocate at the United States Public Interest Research Group, which is issuing the brief with the United States Student Association and Young Invincibles, an organization for people 18 to 34. According to the C.B.O. report, the government will get 12.5 cents in revenue next year for every dollar lent through subsidized Staffords, 33.3 cents per dollar in unsubsidized Staffords, 54.8 cents on each dollar of graduate school loans, and 49 cents per dollar of parent loans, for a total of $34 billion a year. Borrowers of subsidized Stafford loans make up more than a third of those using federal student aid. More than two-thirds of those borrowers are from families with an annual income under $50,000.

The Senate’s recent budget resolution extended the lower rate indefinitely, and the House will soon have legislation to extend it for two more years. However, postponing the rate hike will not be enough to mitigate the ever-worsening student debt crisis.

In the first three months of 2013, borrowers defaulted on their student loans in record numbers. According to the Department of Education, 6.8 million federal student loan borrowers have now defaulted on $85 billion in debt. Sequestration has only worsened the problem, driving up fees for some federal loans.

Students are relying more heavily on federal loans to pay for education as states have uniformly gutted higher educationfunding, pushing tuition costs to new heights. If states were willing to raise taxes rather than slash education funding, tuition costs could be stabilized.

The Consumer Financial Protection Bureau is also working on an initiative to help students pay off their debt and find alternative refinance options. Campus Progress and other groups have also pushed for reductions in the interest rate on federal student loans.

But students aren’t the only ones suffering from this crisis. Student debt is directly responsible for the feebleness of thehousing recovery. College graduates saddled with debt and unable to find suitable wages have avoided buying houses and taking on mortgages, while others aren’t able to qualify for loans because of their excessive student debt.

Originally published by ThinkProgress.

 

3 WAYS TO SHOW YOUR SUPPORT

ONE-TIME DONATION

Just use the simple form below to make a single direct donation.

DONATE NOW

MONTHLY DONATION

Be a sustaining sponsor. Give a reacurring monthly donation at any level.

GET SOME MERCH!

Now you can wear your support too! From T-Shirts to tote bags.

SHOP TODAY

Sign Up

Article Tabs

prison reform, incarceration rates, private prisons, for-profit prisons, white supremacy, enslavement, climate justice, racial justice, Green New Deal

The year 2020 has caused many white people to realize we live in a racist system. The Green New Deal is about systemic change for all, and deconstructing racism must be front and central in this agenda.

coronavirus pandemic, Donald Trump, Boris Johnson, Jair Bolsonaro, COVID-19 deaths, downplaying coronavirus

By infecting three of the world’s most right-wing leaders, the coronavirus underscored not only the incompetence and irresponsibility of their governments – but the truth that their brand of populism doesn't keep people safe.

COVID-19, corporate bailouts, corporate welfare, corporate destruction

Corporations are not "too big to fail" and, when they commit crimes, they are not "too big to jail." As David Whyte writes in his new book, "Ecocide: Kill the Corporation Before It Kills Us," the moment is now to rein in out-of-control corporate power.

The world has lost an incredible thinker and doer. I have lost an amazing friend. A void exists where before it was filled with David's optimism, humour and joy.

Kevin Zeese speaks at a rally for Chelsea Manning. By Ellen Davidson.

Kevin fought to bring truth every day. We must not lose this struggle.

prison reform, incarceration rates, private prisons, for-profit prisons, white supremacy, enslavement, climate justice, racial justice, Green New Deal

The year 2020 has caused many white people to realize we live in a racist system. The Green New Deal is about systemic change for all, and deconstructing racism must be front and central in this agenda.

coronavirus pandemic, Donald Trump, Boris Johnson, Jair Bolsonaro, COVID-19 deaths, downplaying coronavirus

By infecting three of the world’s most right-wing leaders, the coronavirus underscored not only the incompetence and irresponsibility of their governments – but the truth that their brand of populism doesn't keep people safe.

COVID-19, corporate bailouts, corporate welfare, corporate destruction

Corporations are not "too big to fail" and, when they commit crimes, they are not "too big to jail." As David Whyte writes in his new book, "Ecocide: Kill the Corporation Before It Kills Us," the moment is now to rein in out-of-control corporate power.

The world has lost an incredible thinker and doer. I have lost an amazing friend. A void exists where before it was filled with David's optimism, humour and joy.

Kevin Zeese speaks at a rally for Chelsea Manning. By Ellen Davidson.

Kevin fought to bring truth every day. We must not lose this struggle.