A
Congressional proposal to cut student loan interest rates in half will
save the average lower- and middle-income borrower $4,420 over the life
of their loans, according to a new report by ConnPIRG.
The
Congressional proposal, which the House is expected to vote on next
week, would lower interest rates on undergraduate subsidized Stafford
loans over the next five years until they are cut in half to 3.4%
starting in 2011. In 2004-2005 more than 5.5 million students took out
subsidized Stafford loans to pay for college.
"Over
the past decade we have asked America's college students to shoulder a
heavy burden of debt to pay for college," said Katie Kleese, ConnPIRG
Campus Organizer. "Cutting interest rates on student loans will help
millions of lower- and middle-income students and their families by
saving them thousands of dollars in student loan payments."
In
2004-5 33,567 Connecticut students at 4-year colleges took out
subsidized Stafford loans. The average borrower graduated with $14,263
in loan debt.
"There
is a higher education crisis in this country," agreed State
Representative Denise Merrill. "As the report Transforming Higher
Education: National Imperative, State Responsibility [released
November, 2006 by the National conference on State Legislatures, can be
obtained online at www.ncsl.org] revealed, tuition and fees are
skyrocketing, and financial aid and loan programs have not kept pace.
Making student loans more affordable is probably the most important and
direct way that congress can immediately reverse this trend. It is
imperative that the nation act now to help students get the education
that past generations have enjoyed and that future generations deserve."
By
lowering interest rates on subsidized Stafford loans, Congress would
save Connecticut college graduates thousands of dollars over the life
of their loans:
- The average four-year college student in Connecticut starting school
in 2007 with subsidized Stafford loans would save $2,350 over the life
of his or her loans under the proposed legislation.
- When the interest rate cut is fully phased in, the average four-year
college student in Connecticut starting school in 2011 with subsidized
Stafford loans will save $4,560 over the life of his or her loans.
Many
students work full- or part-time jobs to control their loan debt while
attending school making it difficult to excel at school work or take on
leadership, University of Connecticut Undergraduate Student Government
President Andrew Marone pointed out. "By cutting those interest rates,
students are not only presented with a greater opportunity in attending
college, but are also provided with a better atmosphere to be
successful in following their undergraduate education. In the effort to
make university education affordable for all, cutting interest rates on
student loans is a much needed first step in the right direction," said
Marone.
6,849
students at the University of Connecticut took out subsidized Stafford
loans in 2004-5 with the average borrower graduating with $14,382 in
loan debt.
- The average University of Connecticut student starting school in 2007
with subsidized Stafford loans would save $2,370 over the life of his
or her loans under the proposed legislation.
- When the interest rate cut is fully phased in, the average University
of Connecticut student in Connecticut starting school in 2011 with
subsidized Stafford loans will save $4,600 over the life of his or her
loans.
Local
Connecticut college advocates, including Trinity College President
James Jones Jr. believe that access and affordability of higher
education is the most critical issue for the coming years. "In the next
decade or so, access to a superior education, such as that offered by
Trinity, will become the single most ubiquitous concern of all of us
who are involved in this field," said President Jones.
883
students at Trinity College took out subsidized Stafford loans in
2004-5 with the average borrower graduating with $16,338 in loan debt.
- The average Trinity College student starting school in 2007 with
subsidized Stafford loans would save $2,700over the life of his or her
loans under the proposed legislation.
- When the interest rate cut is fully phased in, the average Trinity
College student in Connecticut starting school in 2011 with subsidized
Stafford loans will save $5,230 over the life of his or her loans.
About
5.5 million students borrow subsidized Stafford loans every year. Of
those borrowers, 3.3 million attend four-year public or private
non-profit institutions. According to the Congressional Research
Service, 75% of traditional-age subsidized Stafford borrowers come from
families with incomes of $67,000 or less. The median income for an
American family of four is $65,000.
Valerie
Lewis, Commissioner of Higher Education, agreed that an aggressive
approach to making higher education affordable is imperative. "Students
who graduate with thousands of dollars of debt often must limit their
career options to those lucrative enough to help them pay off their
loans," stated Lewis. "This is contrary to higher education's mission
which is to expand student possibilities so they can pursue any career,
regardless of salary. Our country needs to invest in our students by
making higher education more affordable and the congressional proposal
to cut student loan interest rates in half is the first step to doing
just that."
The
policy proposal analyzed by ConnPIRG would cut the fixed interest rate
on subsidized Stafford loans for undergraduates from 6.8% to 3.4% over
the next five years. Loans originated during the intervening five years
will be set at fixed interest rates of 6.12% in 2007-08, 5.44% in
2008-09, 4.76% in 2009-10, 4.08% in 2010-11, and 3.4% from 2011
forward. After graduation, students would be able to consolidate their
loans into one loan at the weighted average of the interest rates of
their various loans.
All
federal Stafford loans receive two forms of government support: the
federal government covers the cost of the loans to lenders in case of
student default and provides financial subsidies to insure lenders make
a profit. Stafford loans are considered "subsidized" when the
government pays the interest charges on the loan while the student is
in school.
The
House of Representatives is scheduled to vote on the plan to cut
interest rates during the first 100 legislative hours of the 110th
Congress.
Click to See Savings By Campus.
