Washington, D.C. – U.S. Senator Tim Johnson (D-SD) has thrown his support behind an effort to stop student loan interest rates from doubling for thousands of South Dakotans. Johnson is a cosponsor of the Student Loan Affordability Act, which would keep the subsidized Stafford student loan interest rates at 3.4 percent. If no action is taken, the rates of new loans will jump to 6.8 percent on July 1, 2012.
“Federal loans enable students to access higher education, regardless of how much money their family has,” said Johnson. “I am opposed to this interest hike because it doesn’t make sense to explode the debt burden on low and moderate income students who rely on these loans.”
Should Congress fail to act, nearly 8 million students nationwide will see their interest rates double. If the scheduled hike is stopped, the average subsidized Stafford loan borrower will save $2,800 over a 10-year repayment term. Those who rely on federal loans to finance their education will save about $5,000 over the life of the loan.
South Dakota students rely heavily on student loans and many will be negatively impacted by the scheduled interest rate hike. During the 2010-2011 school year, approximately 30,000 undergraduates were recipients of subsidized Stafford loans in South Dakota. For South Dakotans graduating from college, the average student loan debt is $23,171. A recent report by the Project for Student Debt found that South Dakota ranks first in the country for having the largest percentage of students leaving college with debt.
“At a time when too many students are graduating with enormous debt loads, this is not the time to make it more difficult for students to finance their education and manage their debt,” Johnson continued.