As student loan interest doubles on July 1, some are wondering if Congress could have done something to stop student loan interest rates from rising so rapidly.
Student loan interest rates were kept at 3.4 percent last year as a sort of gift to the public right before presidential and congressional elections. Rates were first dropped for 2008 down to six percent, 5.6 percent for 2009, 4.5 percent for 2010, and then finally 3.4 percent in 2011. But that gift expires on July 1, and incoming college freshmen will be paying 6.8 percent, which amounts to an extra $5,000 more when compared to college kids just one year older.
Around 66 percent of students are graduating with student loan debt higher than $25,000. About 10 percent graduate with loans higher than $54,000. The Congressional Budget Office (CBO) estimates that more than $38 billion of the almost $113 billion in new student loans made this year will be lost to defaults. Overall, student loan debt now tops $1 trillion, and some experts are worried there might be a wave of student loan defaults that trigger another financial panic if the job economy doesn’t improve for millennials.
As student loan interest doubles, Justin Draeger, president of the National Association of Student Financial Aid Administrators, says that students must let Congress hear their voice:
“What is definitely clear, this time around, there doesn’t seem to be as much outcry. We’re advising our members to tell students that the interest rates are going to double on new student loans, to 6.8 percent.”
The reason student loan interest rates are doubling is because of the new budget plans being proposed by Congress. House Republicans say the higher interest rates amount to $6 billion in spending cuts. Senate Democrats are paying lip service to wanting to keep student loan interest rates at their current levels but their recently passed budget did not actually set aside the money necessary to do so.
As student loan interest doubles, what do you think Congress should do?