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Unless Congress acts by July 1, the interest rate for student loan borrowers in Arizona will double from 3.4 percent to 6.8 percent. According to an issue brief released today by the Arizona Public Interest Research Group (Arizona PIRG), the rate increase would translate into a $902 increase in debt per Arizona student, per loan.
“Student loans should make college more accessible so that we can be better prepared for the future,” said Shayna Stevens, a junior at Northern Arizona University.
The low 3.4-percent rate for subsidized Stafford student loans – which are offered to the neediest students – was set to expire in 2012, but Congress and the President temporarily extended it for one more year. The interest rate is set to double to 6.8-percent on July 1 unless Congress acts to extend the current low rate.
“Keeping the interest rate low on student loans will make college more accessible and help students, workers, and the unemployed get the postsecondary education they need,” said Serena Unrein, Public Interest Advocate for Arizona PIRG.
Student debt is a growing hardship for many students and recent graduates, limiting their financial options and making it difficult for them to start a family or save up for buying a home. Last year student debt nationwide hit the $1 trillion mark, passing credit card debt as the country’s top form of consumer debt. The average college graduate with loans in Arizona currently has $19,950 in student debt.
“Students and families consider higher education to be an investment in the future,” stated Unrein. “Yet Congress seems to be working against that investment - and unless they act now with the future of students in mind, then it’s about to get even worse.”
In addition to the direct impact on students, the nation’s economic recovery as a whole could be hastened by easing the burden of high student loan debt. Despite the number of unemployed workers looking for jobs right now, the lack of an educated workforce remains a persistent problem in Arizona. It is estimated that by 2020, 64-percent of the jobs in the state will require a certificate or degree, while only 31-percent of Arizona’s current population has one.
The federal government is projected to collect 12.5 cents for each dollar loaned in the subsidized Stafford student loan program in 2013-14. Arizona PIRG noted that the federal government will make $50 billion in revenue off of student loan borrowers from across the country this year.
“Congress should keep in mind that the ultimate goal of investing in students is to invest in our future economy. It is shortsighted to generate profits now off the backs of college students while pushing them deeper into debt in the process,” said Unrein.
Several comprehensive student loan reform plans are pending in Washington, DC. The U.S. House passed a bill two weeks ago that increases interest rates even more in the long-term than if the rate is allowed to double. The President has proposed a plan that keeps rates at 3.4 percent in the near term, only to allow them to increase above 6.8 percent later. In the Senate, Sens. Tom Harkin (D-IA) and Harry Reed (D-RI) have proposed a short-term solution which Arizona PIRG supports, a two-year extension of the low 3.4 percent rate that is paid for by closing corporate tax loopholes.
Click here to download Arizona PIRG’s issue brief, “Student Loan Debt in Arizona.”
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