Dear President Obama, Leader Reid, Leader McConnell, Speaker Boehner, and Leader Pelosi:
On behalf of 225 student body presidents representing 3 million college students around the country, we write to request that you act to improve the fast-deteriorating state of student debt in the nation. Recently student loan debt topped $1 trillion nationwide with the average student graduating more than $25,000 in debt. The nation needs real bipartisan action to address this problem long term.
On July 1st, the subsidized Stafford loan interest rate will increase from 3.4 percent to 6.8 percent. Student loan debt is already too high, and inaction will put most borrowers $2,800 further in debt. The neediest students will owe $5,000 more over their repayment period. In an uncertain economy, we simply cannot afford to accumulate more debt.
Youth unemployment is the highest it has been since the 1940s, causing even greater barriers to repaying loans. While college graduates fare better in the job market than those without a college degree, an increasing number of graduates are defaulting on their loans, damaging their credit early on. Nearly 9 percent of borrowers who started repaying their loans in 2009 defaulted in the first two years.
This is an issue about young consumers. Increasing interest rates to 6.8 percent will cause more students and parents to seek riskier private loans. This will make a bad situation worse. The federal student loan programs offer a fixed interest rate while private loans have variable interest rates with terms that make them much pricier and harder to pay off over the long term.
There has long been a promise that, if a student goes to college, works hard, and does well, they will have a more prosperous future ahead of them. Student loan debt is severely undermining that prospect.
Ultimately, we need bold, bipartisan steps to address the systemic problems that are driving up the cost of college. That conversation needs to start now. We hope action on extending the 3.4 percent Stafford loan interest rate is the first of many steps in a real effort to address the level of student debt and reduce the excessive need for borrowing. The long term economic health of the nation and the future prosperity of a generation depend on your actions. Now is the time to make a serious commitment to fix how we finance college in America. This starts with protecting the current student loan interest rates.
Students’ Association President
University of Rochester
…and 200+ undersigned Student Government Presidents.