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TagsBY BOB HOLT
NEWJERSEYNEWSROOM.COM
Research has shown that Americans owe about $870 billion in student loans, and 15 percent of students who attended for-profit schools defaulted on them in 2009.
Some consumer groups have called these loans the nation’s next potential “debt bomb.” According to the Washington Post, a five-year reduction in the interest rate for new federally subsidized Stafford loans is scheduled to end on July 1, which would double interest rates from 3.4 to 6.8 percent.
College students delivered more than 130,000 letters to Congress last week asking them to stop the pending interest rate increase. According to kansascity.com, the Stafford loans are given to undergraduates with low and middle income.
A Northern Arizona University student, Tyler Dowden, said outside the Capitol that he would graduate $25,000 in debt already, but that would increase to $28,5000 with the higher rates.
For more in finance, check out NJNR's new Personal Finance Page.
The debts will rise for students based on those who take out larger loans. According to TIME.com, students who borrow the maximum amount of $23,000 in will see that total increase by $5,000 over a 10-year repayment plan and by $11,000 over 20 years.
Legislation has been introduced that would maintain the current interest rates, and President Obama supports keeping it at 3.4 percent through 2013. According to the Congressional Budget Office, keeping the lower rate would cost taxpayers approximately $6 billion.
Data has shown that student loan debt of $870 billion has now grown higher than car loans, which are $730 billion and credit card debt, now at $693 billion.
Leaders of the education committee are saying that the responsibility for holding down college costs low should go to the schools rather than the federal government. According to The Chronicle of Higher Education, Democratic Rep. Joe Courtney of Connecticut suggested that Congress keep the lower student loan interest rates by making budget cuts on items like federal subsidies for oil companies and banks.
