After agreeing women should be allowed to join the Augusta National Golf Club, GOP presumptive nominee Mitt Romney and President Barack Obama agree on a second thing: Extending low-interest rates on student loans.
In 2007, Congress reduced the interest on federally subsidized Stafford loans to 3.4%. If that measure is not extended, the interest rate will double in July, and add an average of $1,000 extra to students’ already deepening debt.
So let’s just take a look at what student debt looks like now, without that extra $1,000. The current situation is pretty depressing already.
The Consumer Financial Protection Bureau went about dampening everyone’s spirits last month by announcing that student debt surpassed $1 trillion. That tops both credit card debt and auto debt, which both hover at around $700 billion.
All of this prevents college graduates from moving forward in their lives as quickly as they once could. According to DBRS, only 9% of 29- to 34-year-olds received a first-time mortgage from 2009 to 2011, compared with 17% 10 years earlier. Those between the ages of 25 to 34 also made up only 27% of all homebuyers in 2011, the lowest in the last decade.
DBRS said this is because college grads are just finding it more difficult to get a mortgage. Huge monthly payments on student loans are making it impossible for them to save up for a down payment, and their large amount of debt makes qualifying for a mortgage difficult.
With both of those factors, it’s also unlikely that they’ve built up much of a credit history, making them even less attractive as a mortgage candidate. And with the job market being what it is, many people have chosen to go back to graduate school — which extends the terms on their existing student debt and just racks more up.
It’s a hard world out there for indebted college grads, and adding $1,000 to their already unmanageable debt will make it more difficult for them to stay afloat and more difficult for the economy to recover. This is the prime reason why this should be a completely bipartisan effort. No fuss or politicking is necessary.
But obviously we’re talking about Washington here. This seems like a pivot to the center for Romney, who’s already been criticized about being “too moderate.” How Republicans react to his willingness to extend something that will cost the government about $6 billion will be telling, and hopefully won’t result in deadlock over an issue that may mean survival or default for recent grads.
jhuseman@housingwire.com
@JessicaHuseman
