Without Congressional action, interest rates on federally subsidized Stafford student loans will double on July 1 from the current 3.4% to 6.8%, costing the average student borrower an extra $1,000 in interest payments. Nationally, Stafford loans are used by 7.4 million college students, including 380,000 Ohioans. Student loan debt now stands at $1 trillion –exceeding both credit card and auto loan debt –and the average Ohio college student graduates with nearly $28,000 in loans. Doubling the interest rate could cause many students to transfer colleges or drop out of school altogether.
Although Democrats and Republicans alike agree that interest rates should be kept at the current level, the parties have proposed distinctly different ways in which to pay the estimated $6 billion cost.
Democrats want to close a corporate tax loophole (worth $6 billion) that allows some wealthier business owners to escape paying Social Security and Medicare taxes. House Republicans have passed a bill that would zero out the Prevention and Public Health Fund
(PPHF) of the Affordable Care Act (worth $11.9 billion), which funds a number of disease prevention programs.
Innovation Ohio has examined statistics from both the Stafford Loan program and the Prevention and Public Health Fund, and has analyzed the impact on Ohio if Stafford Loan interest rates are allowed to double and the Prevention Fund is zeroed out in order to pay for keeping interest rates low.
Read the report.
Read the press release.