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If no Congressional action is taken, the interest rate on subsidized Stafford Student Loans will double from 3.4% to 6.8% on July 1. A group including Pennsylvania students, parents, and the Pennsylvania Public Interest Research Group (PennPIRG), a non-profit, non-partisan, public interest advocacy organization, are calling on Pennsylvania Senators Bob Casey and Pat Toomey to take action to keep interest rates where they are now.
"An increase in the interest rate of federal student loans is a crippling blow to students who want to improve society by seeking a quality education, and this acts as an unnecessary barrier to the access of higher education," said Courtney Lennartz, student body president of Penn State.
The national average for student loan debt that a borrower carries at graduation is $25,000. In Pennsylvania, the average is $28,000. If the interest rate goes up, those with the loans are expected to pay an additional $1,000 each year over the life of the loan.
"That translates into $396 million that otherwise would be going into the Pennsylvania economy, but instead would be going toward paying off debt," said Christine Lindstrom, higher education program director with PennPIRG.
Both Democrats and Republicans agree the interest rate on federal student loans should be kept low, but they haven't come to an agreement on how to pay for the extension. It will cost $6 billion to extend the lower interest rate for one year.
"Republicans have proposed taking money from a healthcare fund that was created out of the healthcare reform, which Democrats don't want to do. Democrats have proposed closing a corporate tax loophole, which Republicans don't want to do," said Lindstrom.
The Senate is scheduled to vote on the issue Tuesday.