On average, kids graduate from college in the US with $23,000 to $27,000 in student loan debt. They graduate into a slow but improving economy where pay is often lower than their expectations. Their student loan payments take a healthy bite out of already low paychecks.
Student loans are an important resource for students allowing students from all socioeconomic groups access to post high school education. At the current 3.4% interest rate, the subsidized student loan is a good deal. The unsubsidized loan for undergraduates at 6.8% is a little steep. So is the 6.8% interest charged to parents and to grad students for Direct Plus loans.
With subsidized loan interest rising to the same 6.8% interest level of unsubsidized loans on July 1, the interest on all student loans will be the same-too high. There are those who say it is not a big deal because the monthly payment for a student only rises $38.32. But over the 10 year repayment timeframe, the student is paying over $4,000 more for his loan.
In a country that needs to increase the number of science, technology, medical and other professionals, we need to find ways to keep interest rates low for students. The US government will save over sixty million dollars over the next decade due to the conversion from a bank centered student loan program to a government centered program. Student loan defaults have declined since the government took over the loan program. With these savings, surely we can find a way to support our students at lower cost to them and their families.