Americans now owe more on student loans than on credit cards, auto loans and mortgages, according to the Federal Reserve Bank of New York and the U.S. Department of Education. For the first time, student loans taken out in 2011 exceeded $100 billion with total student loans surpassing $1 trillion. Mounting student debt has forced many students to drop out, resulting in the low college-completion rates.
In New England, where college prices and student debt rank both among the highest in the nation, members of the region’s congressional delegation are leading the charge to prevent further increases in borrowing costs. Bills filed by U.S. Rep. Joseph Courtney (D-Conn.) and U.S. Sen. Jack Reed (D-R.I.), would prevent the doubling of the interest rate on federally subsidized Stafford loans. Currently, the rate on a Stafford loan is 3.4% which would double to 6.8% on July 1 unless Congress takes action to lock in the current rate. Any increase in the rate would increase college costs for millions of students across the country.
In 2007, the rate for subsidized Stafford loans was fixed at 6.8%. In the same year, Congress passed the College Cost Reduction and Access Act, which gradually lowered the rate (over five years) from 6.8% to 3.4%. The rate will expire in 2012, reverting to the 6.8% rate if Congress does not take action.
Rep. Courtney is the chief sponsor of H.R. 3826, to amend the Higher Education Act of 1965 to extend the reduced interest rate for Federal Direct Stafford Loans. Other New England cosponsors include Rep. Michael Capuano (D-Mass.), Rep. David Cicilline (D-R.I.), Rep. Rosa DeLauro (D-Conn.), Rep. William Keating (D-Mass.), Rep. James Langevin (D-R.I.), Rep. John Larson (D-Conn.), Rep. James McGovern (D-Mass.), Rep. Michael Michaud (D-Maine), Rep. Christopher Murphy (D-Conn.), Rep. John Olver (D-Mass.), Rep. Chellie Pingree (D-Maine), Rep. John Tierney (D-Mass.), and Rep. Peter Welch (D-Vt).
A companion bill filed by Reed S. 2051 is cosponsored by Sen. Sheldon Whitehouse (D-R.I.), Sen. Patrick Leahy (D-Vt.) and Sen. Bernie Sanders (I-Vt.).
Stafford low-interest loans were named for the late U.S. Sen. Robert Stafford of Vermont and are awarded to low- and middle-income students with demonstrated financial need. Subsidized Stafford loans are federally guaranteed and based on financial need. The federal government pays the interest on a subsidized loan while the student is still in school. Unsubsidized Stafford loans are federally guaranteed but not based on financial need and interest accrues while the student is in school.
According to The Project on Student Debt, college seniors in 2010 graduated with an average debt of $25,250. Four New England states rank in the top 10 states with high levels of student debt.
Debt data as reported by campuses to Peterson’s Undergraduate Financial Aid and Undergraduate Databases. © 2011 Peterson’s, a Nelnet company. All rights reserved.
State rankings are from 1 (highest) to 50 (lowest). The Project on Student Debt did not calculate state averages when the usable cases with student debt data cover less than 30% of bachelor’s degree recipients in the Class of 2010 or when the underlying data for that state showed a change of 30% or more in average debt from the previous year. Such large year-to-year swings likely reflect different institutions reporting each year, reporting errors, or changes in methodology by institutions reporting the data, rather than actual changes in debt levels.
All data are from public and private nonprofit four-year institutions only. Some colleges did not report student debt data. Only colleges that granted bachelor's degrees and reported the percentage of graduates with debt and average debt are included in the state figures. Enrollment and tuition data are from the National Center for Education Statistics, Integrated Postsecondary Education Data System. Pell Grant data are from the U.S. Department of Education. Student debt, Pell Grant, and other data can be compiled into sortable tables or downloaded into a spreadsheet from college-insight.org.
Calculations by the Project on Student Debt. See "Student Debt and the Class of 2010" report for details.
Carolyn Morwick is a consultant at NEBHE and former director of the Caucus of New England State Legislatures.