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Issue Brief: Student Loan Debt in Illinois
Background The resolution of the on-going national debate about whether or not to extend the low interest rate on federal student loans will have a sizable impact on Illinois’ economy. Without a new plan, on July 1 the interest rate on subsidized Stafford student loans will double, from 3.4 percent to 6.8 percent.
Student borrowing in Illinois A college degree is practically a necessity these days. The social and economic health in Illinois relies on the success of its students and workers. But the recession has left the state with less money to spend on higher education and other services, squeezing families who are already straining to pay for college for their children as well as the unemployed who are seeking new skills to stay competitive in the job market. Students and families are turning to federal student loans to finance a degree or credential program. Now, 62 percent of Illinois graduates carry student loan debt, with an average of $23,885 per borrower .
Student borrowing and its impact on the economy Student loan debt recently surpassed credit card debt as the top form of consumer debt across the country, at $1 trillion dollars . Such significant debt has serious implications for the economy, in Illinois and elsewhere. The vast majority of student loans made are federal – eight in ten student loans made are backed by the federal government . In Illinois, 365,416 federal student loan borrowers will be impacted . If the low rate is extended for one year, the average savings per borrower will be $1,061 over the life of the loan translating into $387,706,376 dollars in savings that student loan borrowers would otherwise carry in additional debt burden if the rate hike occurs .
Stabilizing the Illinois economy Unemployment in Illinois is higher than the national average. The job market is experiencing a skills gap between the numbers 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 for college degree, with only 43 percent of the population having one .
Keeping the interest rate low on student loans will send the urgent signal to students, workers, and the unemployed to get the postsecondary training needed to adapt to the new economic reality in the state.
Senators Durbin and Kirk should be urged to support extending the low rate for the sake of the students and economy in Illinois. Senator Durbin backed the College Cost Reduction and Access Act of 2007, which set the lower interest rate , and cosponsored legislation to extend the rate. Senator Kirk has not taken a position on the issue.
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