WASHINGTON, D.C.—More than 382,000 students across Ohio would be forced to pay significantly more in college loan costs unless Congress acts to block the interest rate from doubling on federally-subsidized Stafford loans by July 1st. U.S. Sen. Sherrod Brown (D-OH) joined students from The Ohio State University today to call for passage of Brown’s Stop the Student Loan Interest Rate Hike Act of 2012, legislation that would maintain the current interest rate, which is set at 3.4 percent, and prevent a hike to 6.8 percent scheduled for July 1st. Brown also revealed a report on the number of students at each college and university in Ohio that utilize subsidized Stafford loans.
“We must act now to prevent more than 26,000 OSU students – and 382,000 students across Ohio – from paying more for their student loans come July,” Brown said. “Already, recent college graduates are struggling to find work, with half of young college graduates jobless or underemployed. Allowing the interest rates on federal student loans to double is a step backwards. Ohio students – and our economy – can’t afford this sucker-punch at a time when we need to be doing more to get our economy back on track.”
Three students—attending The Ohio State University with the help of federally-subsidized Stafford loans—provided testimony to Brown on how Stafford loans have allowed them to afford the costs of a college education. More than 26,000 OSU students rely on federally-subsidized Stafford loans to help finance their college degree. The three students who provided testimony were:
- Sarah Graf, a junior from Fairfield County;
- Shawn O’Meara, a senior from Cuyahoga County; and
- Kyle Strickland, a junior from Franklin County.
Student debt has reached nearly $1 trillion—exceeding credit cards and auto loans. Meanwhile, a new analysis released last week by the Associated Press found that half of young college graduates are either jobless or underemployed in positions that don't fully use their skills and knowledge.
Brown outlined how his legislation, the Stop the Student Loan Interest Rate Hike Act of 2012, would help keep college tuition more affordable for hundreds of thousands of Ohio college students. According to the Senate Health, Education, Labor, and Pensions (HELP) Committee, a higher interest rate would add approximately $1,000 in loan debt per loan for the average student. The Stop the Student Loan Interest Rate Hike Act, which is fully paid for, would keep the student loan interest rate from climbing by eliminating a tax loophole that the watchdog agency, the Government Accountability Office (GAO), has determined is a problem that currently allows some shareholder-employees of so-called “S corporations” to avoid paying their fair share of Social Security and Medicare payroll taxes.
The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly-subsidized Stafford loans for undergraduate students to 3.4 percent over a set period of time, but the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but students still attending school after July 1st that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans, adding even more to their existing debt load.
Last year, Brown introduced the Student Loan Simplification and Opportunity Act of 2011, legislation that would simplify the student loan repayment process. This legislation would help borrowers avoid financial penalties for missed payments, save Ohio graduates money on their student loans, and bolster the federal Pell Grant program that helped send more than 240,000 Ohio students to college from 2008-2009.