A coalition of over 100 student body presidents, representing more than 1 million college students, will deliver a petition to lawmakers on Capitol Hill Thursday to demand that Congress find "a long-term solution" to the student loan crisis before July 1, and take immediate action to prevent interest rates on key government loans from doubling.
Americans are coping with over $1 trillion in outstanding student debt, with current students averaging over $27,000 in debt at graduation. The Obama administration has been urging Congress to act quickly to avert the rate hike, which would move interest rates on federally subsidized Stafford loans to 6.8 percent from 3.4 percent. The boost would result in an additional debt burden of about $1,000 for a typical student.
The letter from student body presidents was organized by the National Campus Leadership Council, and includes student leaders from dozens of public and private institutions. The letter asks for a long-term student loan interest rate policy that would keep rates low, ensure that repayment options are simple and predictable, and reinvest any government savings back into financial aid for students. The federal government expects to turn a $51 billion profit on its student lending operations this year, as borrowing costs to the government approach a record low.
Congressional Republicans have sought to overhaul the federal lending program to fix interest rates at a level 3 percentage points higher than the rate on U.S. Treasury bonds, which would result in an interest rate of 4.75 percent for loans issued ahead of the coming school year. However, the GOP bill would result in much higher rates for students in the future, up to a cap of 8.5 percent. GOP presidential candidate Mitt Romney supported extending the 3.4 percent interest rate in 2012 without any additional reforms.
Stafford loan affordability plays a significant role in making a college degree financially accessible for some students, but many also take on additional loans from private-sector lenders at far higher rates, often comparable to credit card rates. Unlike most consumer loans, student debt cannot be discharged in bankruptcy. The threat of bankruptcy serves as a deterrent to some predatory lending practices, since it allows high debt levels to be eventually discharged.
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SOURCE: The Huffington Post