CHICAGO -- If Congress fails to renew a 2007 law that halved the interest rates on federally subsidized Stafford loans, Illinois students will be staring down $380 million per year in debt.
The law that expires this July would double interest rates on college loans from 3.4 to 6.8 percent. Data released by the Illinois Public Interest Research Group (PIRG) Thursday shows that that increase could be particularly damaging for college students in Illinois.
The timing couldn't be worse: Illinois' unemployment is currently just over 9 percent, higher than the 8.2 percent national average. Illinois PIRG predicts that 67 percent of jobs in the state will require a college degree by 2020, though currently only 43 percent of the population has completed secondary education.
For current Illinois students who face the possibility of a doubled interest rate when they graduate, having to choose between substantial loan debt or abandoning post-secondary education is already posing dilemmas.
"I hope to join the Peace Corps or Teach For America right after I graduate, but I have to make plans based on all of this debt I have, because if a program won't defer the interest payments on my debt, then I probably can't do that program," said Kathryn Pantell, a freshman math and psychology student at Loyola University Chicago who hopes to become a teacher.
Pantell said she received a full tuition scholarship to Loyola, but still had to take on some Stafford loans to cover additional costs of food, housing and school supplies. She holds two part-time work-study jobs and lives at home so she can work during the summers, and still she worries that won't be enough to ensure her financial stability after graduation.
Her concerns are likely familiar to the 62 percent of Illinois college graduates, who carry an average loan debt of $23,885, according to Illinois PIRG.
Even at Northeastern Illinois University, which according to U.S. News and World Report had the lowest national percentage of students who graduated with loan debt in 2010, the 16 percent of indebted graduates owe on average about $12,000, said Maureen Amos, a financial aid officer at the university.
Amos said even smaller debt burdens can be a major setback for young people who are trying to break into a shaky job market.
"Student debt can change the shape of a young person's life," Amos said. "When students graduate with high levels of student debt, it can force them to postpone major life events like marriage, parenthood and home ownership. It's important to minimize that debt, including keeping interest rates low, in order to reduce the impact it has on the lives of our graduates.”
U.S. Department of Education data suggests that 365,416 Illinois student borrowers would be affected by a one-year extension of the lower interest rate, saving an average of $1,061 per student, or $387,706,376 statewide.
Democratic Illinois Sen. Dick Durbin cosponsored legislation that would extend the rate. Republican Sen. Mark Kirk has yet to take a position on the issue.