|New student loan rates spike debt|
|Friday, 27 April 2012 11:16|
As college students nationwide face final exams, their financial fate hangs in the balance as the currently reduced student loan interest rate is set to expire July 1.
In his recent weekly radio address, President Barack Obama urged Congress to extend the current subsidized rate of 3.4 percent for more than 7.4 million students. Without the extension, which was a part of the 2007 College Cost Reduction and Access Act, interest rates on subsidized Stafford student loans will double to 6.8 percent on July 1.
In Florida, 452,770 students are recipients of subsidized Stafford loans. At the current interest rate of 3.4 percent, each borrower receives average savings of $979 and accumulative savings of over $443 million. It is also estimated that over 1.5 million African-Americans are recipients of student loans, currently saving an estimated $1,003 per student, or accumulated savings of over $1.5 billion.
Some republicans however have expressed concern about the cost of maintaining the current rates. The Congressional Budget Office has estimated the cost to be $6 billion for one year.
But, with reductions in state funding and support for educational institutions, funding for universities and colleges have significantly declined, forcing students to absorb cuts through higher tuition prices, which significantly increases the extent to which students must rely on loans to finance their postsecondary education.
In his address, Obama pointed out that, for the first time, Americans owe more debt on their student loans than on their credit cards. He stated that students with outstanding loans graduate owing an average of $25,000. To out-educate America's global competitors and make college more affordable, Obama argued that the lower interests rates would be essential to boosting educational standards of the American workforce. Obama also called on states, colleges and universities to act on curbing the rising prices of tertiary education.
The youth vote
The extension of the reduced Stafford loan rates was a key point on the president's recent tour of election battleground states in North Carolina, Colorado and Iowa. The Stafford loan issue would be a hot button topic for young voters in the upcoming November elections. The youth vote was an important demographic for Obama in his previous election. And according to a recent survey, Obama still leads Republican presidential frontrunner Mitt Romney by a 17 point margin among 18- to 29-year-olds.
Meanwhile, in a rare agreement with the president, Republican presidential frontrunner Mitt Romney also urged congress to "temporarily extend the current low rate on subsidized undergraduate Stafford loans."
The Obama administration has taken prior measures to curtail the rising cost of higher education, including: an increase of the maximum amount for Pell Grant awards, the "Pay as You Earn" plan that caps repayment of student loans at 10 percent of monthly income and the 2009 American Opportunity Tax Credit.