Higher education advocates released new data today showing that an anticipated increase in the student loan interest rate would cost Iowa students $250 million per year. The increase would affect federally subsidized Stafford loans, which are provided to almost 7.5 million low and moderate-income students nationwide each year. If Congress does nothing, then beginning on July 1st, the interest rate will double from 3.4% to 6.8% on new student loans.
"In today's economy, students need a college education to get ahead," said Sonia Ashe, Iowa PIRG Advocate. "Doubling the interest rate for student loans would make this goal harder to achieve for thousands of Iowans."
"I'm already going to graduate with a mountain of student debt," said Jessica Tobin at the University of Iowa. "If Congress lets the interest rate double, then I'm looking at even bigger loan payments and it's going to take longer for me to get on my feet financially after I graduate."
The average student borrower already graduates with over $25,000 in student loans. On average, the doubling of the interest rate would add approximately $1,000 for every year a student takes out a loan, adding up to more than $4,000 over a four-year education.
To stave off the rate hike, Congress needs to act by July 1st to maintain the existing interest rate. Without action, interest rates on these loans will double, resulting in significant new debt for future graduates. A vote on the issue is schedule in the United States Senate for Tuesday.
"Student debt can change the shape of a young person's life," said Laurie Wolf, a financial aid officer at Des Moines Area Community College. "When students graduate with high levels of student debt, it can force them to postpone major life events like marriage, parenthood, and home ownership. It's important to minimize that debt, including keeping interest rates low, in order to reduce the impact it has on the lives of our graduates."
Today, the Center for American Progress, Campus Progress, and the USAction Education Fund will release reports detailing how an increase in the Stafford student loan interest rate would impact a number of states. These reports will offer new broad analysis, state statistics, stories of people who could be impacted, and support from student body presidents and campus newspapers.
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Iowa PIRG, the Iowa Public Interest Research Group, is a non-profit, non-partisan public interest advocacy organization.
