Time is running out for Congress to take action to stop a scheduled interest rate increase on Stafford loans this summer. In July, interest rates are set to double for almost 8 million students. The average subsidized Stafford loan borrower will pay an extra $2,800 on their loans, and students borrowing the maximum $23,000 in subsidized loans starting next year would pay almost $5,000 more over a 10-year repayment period.
Sen. Jack Reed (D-R.I.) and Rep. Joe Courtney (D-Conn.) joined dozens of students in March to deliver more than 130,000 letters to Congress to plead for action. The two back legislation to keep the lower rate, but acknowledged that the challenge will be to act before the July deadline. Reed and Courtney say it doesn’t make sense for student loan recipients to face a higher interest rate than homeowners are getting on mortgages or that banks are able to get.
Several studies show that student loan debt now surpasses credit card debt, and many students graduate from school already owing an average of $25,000 in loans. In a weak economy, this has led to more loan defaults than ever, with cases of defaulted federal student loans surging by 58 percent, according to the report, “Judicial Business of the United States Courts.”