Opinion: Keep student loans affordable
One of the most important ways to preserve the American dream, and keep the middle class alive and kicking, is through higher education.
Affordable higher education.
Students have been shouldering an ever greater debt loan over the past decade as states retrench and cut higher education funding.
That’s why it’s so important to keep the interest rate on student loans an affordable 3.4 percent.
Without Congressional action, they are set to double to 6.8 percent on July 1.
Minnesota students are responsible and playing by the rules, but they have some of the highest higher education debt rates in the country. To their credit, they also have some of the lowest delinquency rates.
Minnesota’s congressional delegation has been working to find a solution.
U.S. Sen. Amy Klobuchar who is vice chair of the U.S. Congress Joint Economic Committee, has released a report that shows a rising level of student debt in America and highlights the need for legislation to stop student loan interest rates from doubling.
The report shows that student debt has increased significantly in recent years, nearly doubling from $550 billion in the fourth quarter of 2007 to just under $1 trillion in the first quarter of 2013.
The report also shows that while Minnesota students have some of the highest debt rates in the country, they also have some of the lowest delinquency rates when paying back their loans.
With interest rates on federally subsidized Stafford loans set to double on July 1, the report calls for quick action to prevent loan rates from increasing and new strategies to make higher education more affordable.
Klobuchar has cosponsored legislation that would prevent interest rates on federally-subsidized Stafford loans from doubling from 3.4 percent to 6.8 percent, costing students thousands of dollars in increased interest payments.
The new report shows that two thirds of 2011 college graduates have student loan debt. Minnesota has one of the highest rates of student debt in the country (71 percent compared to 66 percent nationally), with an average debt load that is more than $3,000 higher than the national average ($30,411 in Minnesota compared to $27,152 nationally).
But Minnesota also has one of the top five lowest delinquency rates in the nation when paying back their loans, at just 9.8 percent, compared to 15.9 percent nationally.
Student debt can negatively impact both individual Americans and the larger U.S. economy, since graduates with high debt may delay making key investments like saving for retirement or buying a home. Student debt may even impact a person’s career choices, deterring some graduates from taking lower-paying jobs in public interest fields like education.
New borrowers may soon face additional costs: if Congress doesn’t act, interest rates will double from 3.4 percent to 6.8 percent on new federally subsidized Stafford loans issued on or after July 1, increasing the cost of a college education by as much as $4,500 and impacting 200,000 students in Minnesota.
Solving this issue is a clear way to help young people move up the economic ladder and bolster the nation’s struggling middle class. It’s expensive, but worth it.