WASHINGTON, D.C. - U.S. Senator Amy Klobuchar (D-MN), Vice Chair of the U.S. Congress Joint Economic Committee (JEC), today released a new report that shows a rising level of student debt in America and highlights the need for legislation to stop student loan interest rates from doubling. The report shows that student debt has increased significantly in recent years, nearly doubling from $550 billion in the fourth quarter of 2007 to just under $1 trillion in the first quarter of 2013. With interest rates on federally subsidized Stafford loans set to double on July 1, the report calls for swift action to prevent loan rates from increasing and new strategies to make higher education more affordable. Klobuchar has cosponsored legislation that would prevent interest rates on federally-subsidized Stafford loans from doubling from 3.4 percent to 6.8 percent, costing students thousands of dollars in increased interest payments.
“Higher education provides students with the skills needed to be competitive in today’s global economy and creates a gateway to well-paying careers. At a time when more and more jobs require some form of postsecondary education, we cannot allow cost to be a barrier to opportunity,” Klobuchar said. “This report makes it clear that we need to take immediate action to block the rate hike and I will continue to focus on policies that make college more accessible and affordable for all Americans.”
The new report shows that two thirds of 2011 college graduates have student loan debt. Those borrowers have an average balance of over $27,000, 60 percent of the average annual income for recent graduates. Student debt can negatively impact both individual Americans and the larger U.S. economy, since graduates with high debt may delay making key investments like saving for retirement or buying a home. Student debt may even impact a person’s career choices, deterring some graduates from taking lower-paying jobs in public interest fields like education.
New borrowers may soon face additional costs: if Congress doesn’t act, interest rates will double from 3.4 percent to 6.8 percent on new federally subsidized Stafford loans issued on or after July 1, increasing the cost of a college education by as much as $4,500.
Today’s report highlights the need for smart policies to ease the student debt burden and expand access to affordable options in higher education. Potential solutions include working to restructure loans based on financial hardship, lowering interest rates on federal direct loans and forgiving loan debt for students entering lower-paying jobs in public interest careers.
Klobuchar has fought for policies to expand access to higher education and make college more affordable since her very first days in the Senate. In 2007, she helped pass the College Cost Reduction Act, legislation that raised the maximum Pell grant amounts that students can receive, capped loan payments at 15 percent of discretionary income and cut student loan rates in half for federally subsidized Stafford Loans. She also helped pass legislation to eliminate waste from the federal student loan system and fought to pass legislation last summer to prevent interest rates from doubling on federally subsidized Stafford loans.
The full report on student debt can be found here.