California Legislature—2013–14 Regular Session

Assembly Joint Resolution No. 20

Introduced by Assembly Member John A. Pérez

May 13, 2013

Assembly Joint Resolution No. 20—Relative to student loan interest rates.

LEGISLATIVE COUNSEL’S DIGEST

AJR 20, as introduced, John A. Pérez. Federal Direct Stafford Loans: interest rates.

This measure would request that the Congress and the President of the United States enact legislation to maintain the interest rate of 3.4% for Federal Direct Stafford Loans.

Fiscal committee: no.

WHEREAS, Just last year, Congress passed, and President
Obama signed, an extension to maintain the interest rate for Federal
Direct Stafford Loans at 3.4 percent through June 30, 2013; and

WHEREAS, On July 1, 2013, unless actions are taken, the
interest rate for Federal Direct Stafford Loans will double from
3.4 percent to 6.8 percent; and

WHEREAS, This higher interest rate level is the same level that
graduate students and unsubsidized loan borrowers pay, which
could limit access to California’s public postsecondary educational
institutions by dissuading students from using loans to help pay
for their postsecondary education; and

WHEREAS, The average student loan borrower graduates with
a debt of $27,000, and the scheduled interest rate increase for
Federal Direct Stafford Loans would cost almost 10 million
borrowers approximately $1,000 more per year of education over
the life of a loan; and

WHEREAS, Raising the interest rate for Federal Direct Stafford
Loans will make it even harder for college graduates facing an
already difficult postgraduation job market to repay their loans;
and

WHEREAS, Student loan debt affects Americans of all ages,
as 45 percent of all American families hold outstanding student
loan debt, including 36 percent of families in households headed
by a person 45 to 54 years of age, inclusive, 29 percent of families
in households headed by a person 55 to 64 years of age, inclusive,
and 13.3 percent of families in households headed by a person 65
to 73 years of age, inclusive; and

WHEREAS, Student loan debt has a ripple effect on the
economy, as two million more adults 18 to 34 years of age,
inclusive, live in a household headed by their parents; and

WHEREAS, Each new household leads to an estimated $145,000
of economic growth, suggesting that a delay in household formation
could be slowing broader economic growth; and

WHEREAS, The Bipartisan Policy Center estimates that Echo
Boomers--those born between 1981 and 1995--will account for
75 percent to 80 percent of owner-occupied home acquisitions by
2020, yet the current homeownership rate for young people is
among the lowest in decades while mortgage interest rates are at
historically low levels; and

WHEREAS, Student loan debt also has a significant impact on
retirement, as 62 percent of workers 30 to 39 years of age,
inclusive, 20 percent of whom hold more than $50,000 in student
loan debt, are projected to have insufficient resources for
retirement; and

WHEREAS, According to the Congressional Budget Office,
the federal government makes 36 cents in profit for every dollar
it lends to all student borrowers, and student loans are estimated
to bring in $34 billion next year alone; and

WHEREAS, Higher education loans should be used to subsidize
the cost of higher education, not to be used as a source of profit
for the federal government; and

WHEREAS, Federal Direct Stafford Loans have been a critical
component, in addition to other forms of financial aid, for low-
and middle-income students working towards a postsecondary
degree, and over two-thirds of student loan borrowers are from
families with annual incomes under $50,000; now, therefore, be
it

Resolved by the Assembly and the Senate of the State of
California, jointly, That the Legislature respectfully requests that
the Congress and the President of the United States enact legislation
to maintain the interest rate of 3.4 percent for Federal Direct
Stafford Loans; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies
of this resolution to the President and Vice President of the United
States, to the Speaker of the United States House of
Representatives, to the Majority Leader of the United States Senate,
and to each Senator and Representative from California in the
Congress of the United States.