Without Congressional Action, Student Loan Rates Will Double in July for More Than 166,000 College Students in Colorado
Colorado U.S. Senator Michael Bennet today joined students at the University of Colorado at Denver to call on Congress to block interest rates on subsidized Stafford student loans from doubling. The current 3.4 percent rate will increase to 6.8 percent on July 1, 2012 unless Congress takes action.
“College provides an opportunity for success. But in Colorado, like much of the rest of the country, student loan debt is an increasing and overwhelming problem,” said Bennet. “If we don’t act before July, student loan interest rates will double. We can’t let that happen.”
Bennet spoke to the CU-Denver student government at their meeting at the Tivoli Student Center and heard testimony from CU-Denver students about how these interest rate increases would affect them.
Stafford federal subsidized loans have been issued to more than 7 million low - and middle - income undergraduate students, and the doubled interest rate would affect more than 166,000 Colorado students next year.
In 2007, as part of the College Cost Reduction Act, Congress cut the interest rates for undergraduate subsidized loans in half from 6.8 percent to 3.4 percent, but this reduction will expire if Congress does not act before July 1. This increase would cost the average borrower an extra $2,800 on their loans.
The average 2011 bachelor's degree recipient in Colorado graduated owing $23,662, according to the Colorado Department of Higher Education. Colorado ranks third among all U.S. states and territories with 11.5 percent of student loan customers defaulting, according to the Denver Post.
Since 1985, the cost of a college education has increased by 559 percent. The increase in college costs have caused the amount of student loan debt held by Americans to spike and for the first time in U.S. history the national student debt burden has surpassed $1 trillion – more than credit card debt.
To receive federally-subsidized Stafford loans, students must meet rigorous need requirements. Students are not expected to pay back loans while they are enrolled in college or for a six-month grace period afterward. The federal government pays the interest for the period that the student is in college, unlike unsubsidized Stafford loans.