Issue Brief: Student Loan Debt in Maryland

Why the Low Interest Rate for Student Loans Should Be Extended

Student Loan Interest Rates Set to Double
Without a new plan from Congress, on July 1 the interest rate on subsidized Stafford student loans will double, from 3.4 percent to 6.8 percent. A 2007 college affordability plan lowered the rate, but expired in 2012. Last year, President Obama and Congress extended the low rate for one year.

In Maryland, 105,027 federal student loan borrowers will be impacted if the rate doubles1.

Student Borrowing in Maryland
Fifty-five percent of Maryland’s graduates carry student loan debt, with an average of $24,002 per borrower.2 Unfortunately, student loan borrowers in Maryland will be hit with higher loan costs on July 1, which translates into an additional $909 in cost per student, per loan.3

Meanwhile, as students are struggling with high costs, the federal government is collecting massive, shortsighted revenue from student loan borrowers – projected at $50 billion for next year alone.4

Student Debt and Its Impact on the Economy
Last April, at $1 trillion dollars, student loan debt surpassed credit card debt as the top form of consumer debt across the country.5 Such significant debt has serious implications for the economy in Maryland and elsewhere. For instance, if the low 3.4 percent rate gets extended, this year’s student loan borrowers in Maryland would save a combined $95,469,543, which could be spent in the consumer economy rather than being applied toward paying down debt.

Strengthening the Maryland Job Market
The Maryland job market is experiencing a skills gap between the number of people without jobs and the skills employers are looking for in their employees. By 2020, 67 percent of the jobs in the state will require a certificate or a degree, while only 45 percent of the current population has one.6 Keeping the interest rate at 3.4 percent on student loans will send an urgent signal to students, workers, and the unemployed to get the postsecondary training needed to adapt to new economic realities.

Maryland’s Senators
Senator Barbara Mikulski has supported students and the economy in Maryland. Senator Mikulski backed the College Cost Reduction and Access Act of 2007, which set the lower interest rate.7

Last year, Senator Mikulski voted for both the first and final rate extension plans. 8/9

Senator Ben Cardin has supported students and the economy in Maryland. Senator Cardin backed the College Cost Reduction and Access Act of 2007, which set the lower interest rate. Last year, Senator Cardin voted for both the first and final rate extension plans.

1 Analysis, U.S. Department of Education, 202-401-1576.
2 “Student Debt and the Class of 2011,” The Institute for College Access & Success, http://projectonstudentdebt.org/files/pub/classof2011.pdf.
3 Analysis, U.S. Department of Education, 202-401-1576.
4 Philip Elliott, “House Advances Student Loan Fix,” Associated Press, May 16, 2013, http://bigstory.ap.org/article/house-take-student-loan-fix.
5 Tom Raum, “Recovery Threatened by Student Loan Debt,” Associated Press, April 3, 2012,
http://www.boston.com/news/education/higher/articles/2012/04/03/recovery….
6 “Maryland Analysis 2011,” College Complete America, http://www.completecollege.org/docs/Maryland.pdf.
7 “Bill Summary and Status – 110th Congress (2007-2008) H.R. 2669,” Library of Congress, http://thomas.loc.gov/cgibin/
bdquery/z?d110:H.R.2669:.
8 “U.S. Senate Roll Call Votes, 112th Congress, S 2343,” United States Senate,
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm….
9 “U.S. Senate Roll Call Votes, 112th Congress, S 1813,” United States Senate,
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm….