During the recession, like a weed in a drought, student loan debt was the only kind of consumer debt that continued to rise.
It increased from $550 billion at the start of the recession to nearly $1 trillion at the beginning of this year. It’s a crippling economic problem, says financial planner Jeff Cutter.
"That debt is actually causing young people to push back many of life’s milestones," Cutter said.
Getting married. Buying a house. Putting money away for retirement. Cutter says if Congress allows interest rates on subsidized loans to double at a time when students are already facing a tough job market, it could stall any economic recovery.
"This is not good for these young folks and it’s not good for America," Cutter said.
The increase will affect undergraduate students taking out loans for the next school year – students like Alex Thomson, 19, a junior at Brandeis University in Waltham. He’s studying public policy and politics, and he hopes to go to law school.
"So I won’t have to pay these loans back in five, six years time," Thomson said. "But that means that my interest will accumulate each year by close to 7 percent for five years. I will have a mountain of debt, made even worse because of these ridiculously high interest rates.”
Thomson would like to go into the public sector – maybe run for public office – but he says he and other hopeful law students are reevaluating their decision to serve the greater good if Congress doesn’t step up.
“Why would we want to go into a field where nobody can get along?" he said. "They’re not even looking out for the interest of students, which should be a bipartisan issue, so I think it just turns people off to the political process in general.”
Despite that public hostility, colleges continue to increase tuition as states continue to slash funding, leaving students like Thomson to tend to their loans.
Sen. Elizabeth Warren on Interest Rates
Sen. Elizabeth Warren's Bill on Interest Rates