Issue Brief: Student Loan Debt in New Jersey

NJPIRG

Issue Brief: Student Loan Debt in New Jersey
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 New Jersey, 144,926 federal student loan borrowers will be impacted if the rate doubles.

Student Borrowing in New Jersey
Sixty-four percent of New Jersey’s graduates carry student loan debt, with an average of $27,610 per borrower. Unfortunately, student loan borrowers in New Jersey will be hit with higher loan costs on July 1, which translates into an additional $928 in cost per student, per loan.

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.

Student Debt and Its Impact on the Economy
Last April, at $1 trillion, student loan debt surpassed credit card debt as the top form of consumer debt across the country. Such significant debt has serious implications for the economy in New Jersey and elsewhere. For instance, if the low 3.4 percent rate gets extended, this year’s student loan borrowers in New Jersey would save a combined $134,491,328, which could be spent in the consumer economy rather than being applied toward paying down debt.

Strengthening the New Jersey Job Market
The New Jersey 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, 66 percent of the jobs in the state will require a certificate or a degree, while only 46 percent of the current population has one. 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.

New Jersey’s Senator
Senator Bob Menendez has supported students and the economy in New Jersey. Last year, Senator Menendez voted for both the first and final rate extension plans.