Monday, March 10, 2014 3:47 PM
Published on: Thursday, June 13, 2013
By Jack Owen
Total student debt is now the second largest form of consumer debt at $1 trillion: more than debt from auto loans and credit cards, and only surpassed by mortgages.
According to some legislators, the burgeoning student debt rate has not only harmed individual college students, but it has led to an overall slump in the economy, as recent graduates cannot afford to be home or car owners because of high student loans.
To combat this issue, Sen. Barbara Mikulski (D-Md.) is cosponsoring a Senate bill, the Student Loan Affordability Act, which would bar federal student loan interest rates from doubling for more than 105,000 Maryland students on July 1.
FICO Labs found that the average student loan debt has increased by 58 percent in the past seven years, from just more than $17,000 in 2005 to more than $27,250 in 2012. Proponents of the bill believe that decreasing the cost of student loans will boost the economy by creating more purchasing power for young people.
Supporters also believe the bill would help middle class families better afford college by holding interest rates on federal Stafford students loans at 3.4 percent rather than rising to 6.8 percent in less than a month. For as many as seven million undergraduates, this would mean a $1,000 increase.
Mikulski spoke about her belief in the importance of higher education and the pressing need for reform.
“It’s time for Congress to act to help middle class families that are being squeezed by rising tuition. This fully-paid-for bill will help keep the American dream alive for students across Maryland and the nation and ensure that when they graduate, their first mortgage isn’t their student debt,” Mikulski said.
The Student Loan Affordability Act would aim to freeze need-based student loan interest rates for two years as Congress develops a more long-term solution to hinder student-loan debt accumulation. Mikulski and other proponents argue the whole bill would be paid for by closing three tax loopholes.
The bill is designed to close an oil and gas industry tax loophole and a corporate offshore tax loophole, and it would lower the use of tax-deferred retirement accounts as a complicated estate planning tool.
“I believe in America’s opportunity ladder, and higher education is an important rung on that ladder,” Mikulski said.