Interest rates on federally subsidized student loans could double overnight, if Congress fails to act by July 1.
Given the staggering amount of student loan debt – it stands at $1 trillion, exceeding the nation’s credit card and auto loan debt – any move that could trigger increased loan defaults among students would be damaging to the nation’s economy.
President Barack Obama has called on Congress to keep student interest rates low. It’s a request Congress is considering, and should heed.
True, locking Stafford loans in at 3.4 percent would cost the federal government about $6 billion a year.
But this nation needs to encourage students to get a college education. An educated workforce is good for the economy.
Some 7.4 million students in this country are using Stafford loans, including some 107,000 college students in Washington state.
Bumping the interest rate back to 6.8 percent – that’s where is was before a Democratic-controlled Congress in 2007 began ramping it down – would be counterproductive.
The original legislation called for the interest rate to return to 6.8 percent in 2012. It was a way to gain bipartisan support for the measure.
But a lot has happened in the past five years. The nation stumbled into the Great Recession. Today’s college graduate leaves school with an average debt of $25,000. And the cost of higher education continues to grow.
Clearly Obama’s push for keeping student loan rates low is, in part, politically motivated. There’s a new crop of 18-to-21-year-old voters to court in the presidential campaign.
Regardless, the Stafford loans offer many low-to-moderate income students a chance to earn a degree, increasing their chances of securing a family wage job and a path to the middle class.
Keep the interest rates on Stafford loans as low as possible as one way to make college educations more affordable for young Americans.