By: Ashley Repp
As the end of June rapidly approached, millions of current and soon-to-be students looked towards July and the future with nervousness and fear. On July 1st, interest rates for federally subsidized Stafford Loans were set to rise to a staggering 6.8% from 3.2% if Congress did not vote to keep rates low. This jump in interest rates, which would make interest rates on student loans higher than the interest rates of credit cards, would affect future repayments by a minimum of $1,000 per year. By the end of many students’ four years, this would mean an increase of $4,000 in their debt.
Over the past two months, Jubilee USA Network organized thousands of Catholics, Evangelicals, Episcopalians, Presbyterians, Lutherans and other people of faith to educate their Members of Congress on protecting student loans. On the weekend of June 24th, Jubilee brought together over 40 faith communities that stood in solidarity with students through prayer and petitions against raising interest rates. With thousands of faithful calling and writing their Members of Congress, Jubilee helped to raise the moral voice in opposition to doubling interest rates for tomorrow’s leaders. The day that Congress was scheduled to begin recess for the July 4th holiday, and only two days before the increase was set to happen, Congress had a rare act of bipartisanship and voted to maintain the 3.2% interest rate for subsidized Stafford Loans, and a victory for students’ futures was won!
Jubilee USA traditionally focuses on international debt crises. As we continue to work to broaden and strengthen our global movement on responsible finance, we have seen the need to make connections between these seemingly disparate issues. Student loan indebtedness is a pressing issue, one that mirrors the international debt crisis. Just as it is impossible for indebted nations to invest in infrastructure, healthcare or education - all of which have significant impacts on citizens’ lives - students will have a hard time investing in their futures while being saddled with debt. The continuous cycle of indebtedness that has severely impeded development in the Global South since the middle of the 20th Century is threatening to take hold of the young who face uncertain futures hindered with debt - and most at the age of 22.
Students more often than not need to take out loans to pay for their education. Subsidized Stafford Loans are only given to students of low to moderate-income families. These loans are guaranteed by the federal government, meaning that if a student defaults on the loan the government pays it in full, and interest is paid by the government while the student is still enrolled in school. That government backing is why Stafford loans can be offered with lower interest rates than most other loans and, furthermore, why subsidized Stafford Loans are only awarded based on financial need. The threat posed by this skyrocketing interest rates would, then, have affected the least financially secure.
As the cost of higher education rises to staggering numbers coupled with the need to have a degree in order to compete in the job market, more and more students need to take out loans to finance their education. This state of affairs contrasts sharply with education financing of just over a decade and a half ago. In 1996, less than half of students had to borrow in order to graduate and their loan debt was $12,000 on average. Now, two thirds of students have to borrow to graduate and their average debt is over $25,000.
As the economy reels and many face un(der)employment, the cycle of debt begins as these students are resigned to the worst of means to finance their best intentions. These rising student debts in today’s strained economy are beginning to resemble a bubble that could spell disaster, for both individual students and our nation. As investigation into the structural issues of the economy that set the stage for the crisis of 2008 reveals a lack of transparency, high interest rates and privatization of what are represented as government organizations, it also sheds light on the student debt crisis. History is telling us not to go down this path, not to raise interest rates, not to burden those who might struggle to pay loans, because it will do nothing but seriously damage their futures as well as the entire economy. In other words, Sallie Mae is looking more and more like Fannie Mae and Freddie Mac.
- Download our resource packet
- Read Eric's blog in Sojourners
- Read our coverage in Yes! Magazine, National Catholic Reporter, US Catholic and Catholic News Service
Photo Credit: Illustration by 731 Lexington, Photo: Getty Images [http://www.businessweek.com/articles/2012-03-27/is-student-debt-the-new-home-equity-loan]