More than 7 million students and their families rely on federally subsidized Stafford loans to help pay for college. The loans are distributed by the U.S. Department of Education and currently hold an interest rate of 3.4 percent.
That rate is set to double if Congress fails to act by July 1, 2012. The interest rates will double to 6.8 percent on the new loans. It will African-American households that will be impacted most by the rate increase, according to a report released last week by the Center for American Progress, Campus Progress, and the USAction Education Fund
The Great Recession of 2007-2009 saw education debt go up as more households used education loans to improve their job opportunities. The total share of households with education debt went from 16.2 percent in 2007 to 17.6 percent in 2009.
The median education debt amount increased by $2,573, from $12,427 in 2007 to $15,000 in 2009. The largest increase in the median education debt amount—$5,715—occurred among African American households.
The group with the largest percentage of households with education loans is African-Americans with 27.9 percent. White households have 15.9 percent with such loans.
According to the Center for American Progress:
If Congress allows the interest rate to double on Stafford loans, it will impact millions of families in every state, from high school graduates to student borrowers to sup- porting family members. Not only is this a significant burden, it can also block young Americans’ path to financial independence, forcing them to delay buying a home, starting a family, or pursuing further education. In turn, this has a detrimental effect on the economy: We need people who can make investments for the future instead of being held back by student loan debt.
On May 8, the U.S. Senate considered a motion to bring forward legislation designed to keep interest rates from doubling on July 1. It failed—on a party line vote of 52 to 45—to reach the 60 vote threshold needed to bring the bill to the floor. Sen. Marco Rubio voted against it, Sen Bill Nelson voted for it.