Student debt remains in the political spotlight this election year, as national leaders jockey for support among young voters.
President Barack Obama launched a two-day tour of universities Tuesday to urge Congressional leaders to stop interest rates on Stafford loans from doubling this summer, petitioning them to keep the rates at the current level.
The interest rates, determined by Congress, are set to return to the pre-recession level of 6.8 percent July 1 – twice the current rate, which was temporarily implemented in 2007 when the economic crisis began.
Obama claimed the higher interest rates would tack on $1,000 to the costs each student incurs for taking loans through the program.
“We can’t let America become a country where a shrinking number of people are doing really well, a growing number of people struggle to get by and you’ve got fewer ladders for people to climb into the middle class and to get opportunity,” Obama said.
About 4,700 undergraduate students at GW received more than $30 million in education funding through Stafford loans this year. The average subsidized loan award nationwide was $4,760 in 2011, data from the U.S. Department of Education show.
Associate Vice President for Financial Assistance Dan Small said he supported Congress’s efforts to freeze interest rates, but warned that the implications of doing so are complex. Sustaining the lower rate likely means less federal income for other education initiatives, he said.
“[A rate extension] is probably going to have an effect on the funding, down the line, for other financial aid programs, such as continuous support of the Pell Grant program. Congress will have to address that situation,” he said, estimating that the effects would be felt in five or more years. “Hopefully the economy is better at that time and they can address it.”
GW students typically graduate with about $32,500 in debt, significantly higher than the national average, according to data compiled by the Project of Student Debt.
University spokeswoman Michelle Sherrard said GW is supportive of keeping interest rates low.
Obama estimated that the hike would affect more than 7.4 million students with federal loans, “unless Congress steps up and does what it needs to do.”
The president’s three-state trip made stops at universities in North Carolina, Colorado and Iowa.
High-profile Republicans joined those in favor of an interest rate freeze this week, signaling bipartisan support for an issue previously backed by Democrats. Former Massachusetts governor and presumed Republican presidential nominee Mitt Romney and Senate Minority Leader Mitch McConnell, R-Ky., came out publicly in favor of extending the lower interest rates.
In March, more than 130,000 students petitioned Congressional leaders to prevent interest rates from doubling.
Rep. Joe Courtney, D-Conn., in January introduced a bill to keep interest rates at their current level. The bill garnered 126 Democratic co-sponsors, dozens of whom signed on in the past month. It remains stalled in the House Committee on Education and the Workforce.
Rep. George Miller, D-Calif., pitched a different bill Tuesday, dubbed the “Stop the Student Loan Interest Rate Hike Act of 2012,” which would cover the cost of lower rates by closing tax loopholes.
Obama said stabilizing interest rates was not the only higher education initiative he would press for, berating Congressional Republicans for blocking an extension of a tuition tax credit and increased Federal Work Study positions.
GW was forced in September to pay a larger percentage of Work Study wages due to a $400,000 cut to its federal allotment as a growing number of colleges competed for funding. Small said he anticipates further cuts to GW’s work study dollars next academic year, but said departments would continue to make up the difference to retain the University’s 1,400 student workers.
This article was updated on May 1, 2012 to reflect the following:
Due to a reporting error, The Hatchet incorrectly reported that student loan debt topped credit card debt for the first time in March 2012. In fact, data released by the Federal Reserve in August 2010 found that student loan debt outpaced credit card debt for the first time.