Cincinnati--A
Congressional proposal to cut student loan interest rates in half will
save the average University of Cincinnati student $3,800 over the life
of their loans, according to a new report by Ohio Public Interest
Research Group (Ohio PIRG).
The
Congressional proposal, which the House is expected to vote on next
week, would lower interest rates on undergraduate subsidized Stafford
loans over the next five years until they are cut in half to 3.4%
starting in 2011.
"Over
the past decade we have asked America's college students to shoulder a
heavy burden of debt to pay for college," said LuCinda Hohmann, Field
Associate for Ohio PIRG. "Cutting interest rates on student loans will
help millions of lower and middle income students and their families
nationwide by saving them thousands of dollars in student loan
payments."
In the 2004-05 year, 12,860 students at the University of Cincinnati took out subsidized Stafford loans.
• The average UC student starting school in 2007 with subsidized
Stafford loans would save $1,960 over the life of his or her loans
under the proposed legislation.
• When the interest rate cut is fully phased in, the average UC student
in starting school in 2011 with subsidized Stafford loans will save
$3,800 over the life of his or her loans.
This
also means that statewide Ohio students will be saving money. In the
2004-05 school year, 173,312 Ohio students at 4-year colleges took out
subsidized Stafford loans. The average borrower graduated with $13,495
in loan debt.
•
The average four-year college student in Ohio starting school in 2007
with subsidized Stafford loans would save $2,230 over the life of his
or her loans under the proposed legislation.
• When the interest rate cut is fully phased in, the average four-year
college student in Ohio starting school in 2011 with subsidized
Stafford loans will save $4,320 over the life of his or her loans.
About
5.5 million students borrow subsidized Stafford loans every year. Of
those borrowers, 3.3 million attend four-year public or private
non-profit institutions. According to the Congressional Research
Service, 75% of traditional-age subsidized Stafford borrowers come from
families with incomes of$67,000 or less. The median income for an
American family of four is $65,000.
"Lowering
interest rates on loans is a great first step towards providing
students and families with a more affordable college education," said
Hohmann. "We call on Representative Steve Chabot to support this policy
and for Congress to continue helping students pay for college by
increasing need-based federal student aid and by passing broad
protections for student borrowers, such as limits on the percent of
income that can be required for student loan repayment."
The
policy proposal analyzed by Ohio PIRG would cut the fixed interest rate
on subsidized Stafford loans for undergraduates from 6.8% to 3.4% over
the next five years. Loans originated during the intervening five years
will be set at fixed interest rates of 6.12% in 2007-08, 5.44% in
2008-09, 4.76% in 2009-10, 4.08% in 2010-11, and 3.4% from 2011
forward. After graduation, students would be able to consolidate their
loans into one loan at the weighted average of the interest rates of
their various loans.
All
federal Stafford loans receive two forms of government support: the
federal government covers the cost of the loans to lenders in case of
student default and provides financial subsidies to insure lenders make
a profit. Stafford loans are considered �subsidized� when the
government pays the interest charges on the loan while the student is
in school.
The
House of Representatives is scheduled to vote on the plan to cut
interest rates during the first 100 legislative hours of the 110th
Congress.
