With student loan debt at a trillion dollars and most of that held by the federal government, it seems like it’s quite literally in their hands to make things better for millions of borrowers struggling with their debt. More than half of federal student loans are now at interest rates higher than 6% and over 75% of loans are charged more than 4% interest. Yet government debt otherwise is less than 2%. Why is educational debt carved out to receive such drastically higher interest treatment?
As a result of ongoing unemployment issues nationwide, increased fuel prices and onerous student loan payments plaguing millions of households, our economy continues to struggle its way out of the recession, but far too slowly. But the Center for American Progress (CAP) has proposed that Congress cut student loan interest and have presented a study showing how this will serve as economic stimulus our country so greatly needs.
CAP calls attention to the fact that higher than necessary interest rates are driving delinquencies and defaults. If rates were lower and payments were thus more affordable, more grads would service their debt rather than abandoning it. By making it more manageable for student loan borrowers to make their payments, we improve everyone’s economic stance.
Here’s what CAP says could happen if Congress backed down student loan interest rates:
$$ Reducing student loan costs would increase the likelihood of repayment.
$$ Reducing loan costs would stimulate the economy by freeing up income that could be spent in other sectors of the economy.
$$ Reducing costs on just those loans at interest rates of more than 5% would save borrowers over $14 billion and would generate $21 billion in economic stimulus in just the first year.
CAP says, “Lowering interest rates on existing loans would help everyone—from the borrowers to all Americans, who would benefit from a boost to the economy.”
President Obama is pushing for colleges and universities to make college education more affordable. That’s great for those still in college or looking ahead toward college, but what about the millions of Americans struggling with student loan debt who are no longer in school? None of the proposals have addressed this group – which makes up the large majority of our national trillion dollar student loan debt.
In order to be heard, we must raise our voices. There are several opportunities to help build the momentum required to get our lawmakers’ attention. Here are some venues where you can voice your opinion, share your ideas and help drive change:
#2 Contact your Senators and contact your Representative and ask them to strike the elimination of income based repayment they’re proposing in the current budget legislation.
If you’re out of college and dealing with student loan debt, you know what a big deal this is, so we hope you get involved. And for those of you still in college, living in the moment at Spring Break events like Miami’s Ultra Music Festival, remember this will be your problem in just a few years. So put down the beer funnel for a few minutes and email your lawmaker!
No matter where you are in life, if you have student loan debt, try Tuition.io’s free student loan tool to manage and optimize your debt, see repayment plan options and contact your lender.