BOSTON – U.S. Senate Candidate and consumer advocate Elizabeth Warren today called on Congress to take action to stop the doubling of student loan interest rates this summer.
"Interest rates on student loans will double this summer if Congress fails to act," said Warren. "That interest rate increase is one more financial hit on middle class students and families who are already under pressure. It's not right and Congress must stop it."
Under the 2007 College Cost Reduction and Access Act, subsidized Stafford Loan interest rates were gradually reduced from the 2006 rate of 6.8% to today's 3.4% rates. That provision expires this summer – on July 1, 2012. For student loans disbursed starting the first of July, interest rates will double, back up to 6.8%. It is estimated that the increase will cost the average student borrower more than $1,000.
"Young people all around the Commonwealth – from North Adams and Worcester to Charlestown and Quincy – are doing everything right," Warren said. "They work hard, they play by the rules, they recognize the importance of education and invest so they can get a better job and earn a brighter future. They should not suddenly face higher interest rates, and they should not be left drowning in debt because they are trying to get an education."
When she set up the Consumer Financial Protection Bureau, Warren took steps to improve students' ability to navigate the complex student loan process.
Working with the Department of Education, the CFPB has created a 1-page "shopping sheet" that explains in clear, simple language how much it will cost to attend a particular school, what loan and work study options the student would have, how much the student will owe after graduation – including estimated monthly payments – and how the school compares to others in costs, retention rates, graduation rates, and student loan default rates. Students who are armed with this information can better protect themselves financially.
The CFPB has also developed a repayment assistant and a complaint system to help students learn about their options and provide assistance when they have trouble with lenders, servicers, or debt collectors.