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Report: Consumer Protection
The Cost of College Will Soar if Interest Rates Allowed to Double
More than 7 million students and their families rely on Subsidized Stafford Loans to help pay for college. The loans distributed by the U.S. Department of Education currently hold an interest rate of 3.4 percent. But that rate is set to double if Congress fails to act by July 1, 2012. If that occurs, millions of students will see their interest rates soar to 6.8 percent on the new loans they take in the next year thereby causing a steep rise in their loan burden and effectively increasing the cost of attaining a college degree. At a time when tuition is rising at 8.3 percent a year and median wages for young people are falling, young Americans and their families can ill afford more Washington inaction. If Congress allows the interest rate to increase:
- 7.4 million students will see their college costs go up—about one out of every three college students in the country.
- The increase will cost the average college student about $1,000 more per year of school.
- As a result, the cost of college for the average borrower taking out full Subsidized Stafford Loans will increase by 20 percent next year.
This increase comes at a time when American families are already struggling financially, and having a college degree is more important than ever before. Given the importance placed on a college education and the significance of higher education to a nation’s economic competitiveness, it is unsurprising that in a recent poll 92 percent of young Democrats and 78 percent of young Republicans say that increasing financial aid and making loans more affordabl for college would help make the economy stronger.
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