Yesterday, presumed Republican candidate for President Mitt Romney mentioned his support for extending the current cap on interest rates for federal Stafford student loans, meaning that this is one issue both candidates appear to agree on. The question is, can something be done before those interest rates double in July?
Since 2007, interest rates for Stafford loans have dropped incrementally from 6.8% to their current level of 3.4%, in accordance with regulation intended to make it less of a pain to borrow money to pay for an education.
But the deadline on that interest rate cap is set to expire July 1. If the cap goes away, those rates go back to the original 6.8%.
Student loan debt already stands at nearly $900 billion in the U.S., more than either credit card or auto loan debt. If the interest rate on Stafford loans reverts to 6.8%, that hole could get even larger, as more than 7 million Americans will each be paying thousands of additional dollars.
Additionally, Stafford loan debt can generally not be discharged through bankruptcy, so the debt will remain even after others have been decreased or written off.
A vote is expected in the Senate in the coming weeks on legislation that would keep the current interest rate in place. Our pals at Consumers Union are urging lawmakers to act now.
“Students and their parents are already struggling to keep up with the runaway costs of paying for college,” said Suzanne Martindale, staff attorney for Consumers Union. “Now is not the time to pile thousands of dollars in more debt on their backs by allowing student loan interest rates to double. Keeping interest rates low will help students afford the education they need to stay competitive in today’s tough job market. Congress should invest in our future and side with students and their families by extending the interest rate cap.”
Back in March, more than 130,000 students signed a petition asking Congress to extend the lower rates. The petition was delivered on the steps of the U.S. Capitol, though we assume it could probably have been sent in the mail.