ST. PAUL - With the June 30th deadline looming for parents and graduates to consolidate student loans before interest rates go up between 2 and 8 percent, DFL Lawmakers and Minnesota college students say continued federal cuts and tuition hikes are creating hundreds of thousands of dollars of new debt in the state. Under a new federal law passed by Republicans in Washington, interest rates on federal student loans will go up and Americans will no longer be able to consolidate loans at low fixed rates.
"It's immediately important to lock in a low interest rate on students loans before July 1st, " said Rep Lyndon Carlson. "However, the new federal rules along with endless state tuition increases are creating a generation of debt graduating from our colleges and universities."
Rep. Gene Pelowski, lead DFL member of the House Higher Education Finance Committee said that while Republican cuts at the state level made in 2003 might have balanced the budget on paper; tuition increases caused Minnesota college students to take out more loans. In 2005, students took yet another hit when Minnesota State Colleges and Universities (MnSCU) took another cut to its base investment. The Federal Department of Education estimates that three out of every four undergraduate students have to take out loans and graduate with an average of $20,000 in debt, the third highest in the country.
"We should be thanking these students for carrying the burden of our state budget deficit," Pelowski said. "Not only is it unfair that students and their families are amassing more in debt over an unfulfilled campaign gimmick, but this trend also hurts the very fabric of our society. What message do we send when students leave college already $20,000 in debt? What impact will this have on their ability to start a family, buy a home, and invest in our economy when they're stuck still paying for their education 20 years from now?"
The lawmakers suggested that the last four years of under funding higher education has hurt our families and our economy. They said the state should look at new ways to stop the continued increase in debt despite limited resources.
"The reality is that we don't have a bottomless pit of money, so it's critical that what we do invest focuses on students and explores ways for our colleges and universities to contribute to Minnesota's economic health and vitality," Pelowski said.
Carlson added, "We can no longer place our state's long-term future at risk for short-term gains."
For information on how to consolidate federal student loans, go to www.loanconsolidation.ed.gov or call 1-800-557-7392.