Student Loan Debt in Colorado
Why the Low Interest Rate for Student Loans Should Be Extended
Without a new plan from Congress, on July 1 the interest rate on subsidized Stafford student loans will double, from 3.4 percent to 6.8 percent. In Colorado, 154,128 federal student loan borrowers will be impacted if the rate doubles.
Student Loan Interest Rates Set to Double
Without a new plan from Congress, on July 1 the interest rate on subsidized Stafford student loans will double, from 3.4 percent to 6.8 percent. A 2007 college affordability plan lowered the rate, but expired in 2012. Last year, President Obama and Congress extended the low rate for one year.
In Colorado, 154,128 federal student loan borrowers will be impacted if the rate doubles (1).
Student Borrowing in Colorado
Fifty-four percent of Colorado’s graduates carry student loan debt, with an average of $22,283 per borrower (2). Unfortunately, student loan borrowers in Colorado will be hit with higher loan costs on July 1, which translates into an additional $915 in cost per student, per loan (3).
Meanwhile, as students are struggling with high costs, the federal government is collecting massive, shortsighted revenue from student loan borrowers – projected at $50 billion for next year alone. (4)
Student Debt and Its Impact on the Economy
Last April, at $1 trillion, student loan debt surpassed credit card debt as the top form of consumer debt across the country (5). Such significant debt has serious implications for the economy in Colorado and elsewhere. For instance, if the low 3.4 percent rate gets extended, this year’s student loan borrowers in Colorado would save a combined $141,027,120, which could be spent in the consumer economy rather than being applied toward paying down debt.
Strengthening the Colorado Job Market
The Colorado job market is experiencing a skills gap between the number of people without jobs and the skills employers are looking for in their employees. By 2020, 70 percent of the jobs in the state will require a certificate or degree, while only 41 percent of the current population has one (6). Keeping the interest rate at 3.4 percent on student loans will send an urgent signal to students, workers, and the unemployed to get the postsecondary training needed to adapt to new economic realities.
Senator Michael Bennet and Senator Mark Udall have supported students and the economy in Colorado. As a House member, Senator Udall backed the College Cost Reduction and Access Act of 2007, which set the lower interest rate (7). Last year, both Senators supported the first proposal to extend the interest rate (8) but they did not vote on the final rate extension plan (9).
1 Analysis, U.S. Department of Education, 202-401-1576.
2 “Student Debt and the Class of 2011,” The Institute for College Access & Success, http://projectonstudentdebt.org/files/pub/classof2011.pdf.
3 Analysis, U.S. Department of Education, 202-401-1576.
4 Philip Elliott, “House Advances Student Loan Fix,” Associated Press, May 16, 2013, http://bigstory.ap.org/article/house-take-student-loan-fix.
5 Tom Raum, “Recovery Threatened by Student Loan Debt,” Associated Press, April 3, 2012, http://www.boston.com/news/education/higher/articles/2012/04/03/recovery….
6 “Colorado Analysis 2011,” College Complete America, http://www.completecollege.org/docs/Colorado.pdf.
7 “Bill Summary and Status – 110th Congress (2007-2008) H.R. 2669,” Library of Congress, http://thomas.loc.gov/cgibin/
8 “U.S. Senate Roll Call Votes, 112th Congress, S 2343,” United States Senate, http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm….
9 “U.S. Senate Roll Call Votes, 112th Congress, S 1813,” United States Senate, http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm….