President Obama to discuss student loan rate increase

Sarah Gardner Apr 20, 2012

Kai Ryssdal:President Obama’s doing the college tour next week. No, not that kind of college tour — I think his kids are still a little young for that.

This one’s a swing through three states that’ll get a whole lot of attention in the campaign this fall. The president will be talking student loans at universities in North Carolina, Colorado and Iowa. Interest rates on new federal student loans are set to double July 1.

Marketplace’s Sarah Gardner has more.

Sarah Gardner: The law that cut interest rates on federal student loans five years ago is set to expire this summer. And if Congress does nothing, the rate jumps from 3.4 percent to 6.8. When mortage and other consumer loans are bargain-basement low.

Financial aid expert Mark Kantrowitz says remember: it costs the government billions a year to subsidize student loans. And besides, they’re riskier.

Mark Kantrowitz: If you default on a home equity loan, the lender can foreclose upon your home. If you default on a student loan, the government can’t repossess your education.

That’s no doubt cold comfort to the millions of low- and middle-income students who depend on so-called “Stafford Loans” every year.

Rich Williams is the higher education advocate for U.S. PIRG.

Rich Williams: As we’re trying to find ways to recover from the economic slump we’re in, we want to present every green light possible to students and Americans to go to school, to get the training that will make them competitive in the Marketplace.

But Mark Kantrowitz says it’s not the interest rate on student loans that dissuades kids from going to college.

Kantrowitz: What matters with regard to whether someone enrolls in college is how much money can they get and when do they have to start paying it back.

But with student debt levels at nearly a trillion dollars, education experts agree higher interest rates will hurt students after graduation. Already there’s evidence that rising student debt means many young people are putting off major economic decisions: everything from buying houses to having babies.

I’m Sarah Gardner for Marketplace.

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