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Lower student loan rates do not necessarily mean less student debt

Published: Wednesday, Aug. 14 2013 2:45 p.m. MDT

Universities across the nation are gearing up for their 2013 fall semesters, with many students breathing a little easier since President Obama signed into law Friday a measure restoring lower interest rates for student loans.

Interest rates for undergraduate students doubled from 3.4 percent to 6.8 percent during the month of July but have now been anchored at 3.9 percent for the upcoming school year.

But Veronique De Rugy of the Mercatus Center at George Mason University claims that this may not improve the student loan debt situation, “If we are truly worried about the growth of student loan debt, lowering the interest rate is not likely to improve the situation.”

Here are some key findings De Rugy extrapolates from the above graph and data:

  • "In 2008 the interest rate on student loans was 6.8 percent. This was reduced in stages over the next four years to 3.4 percent. The data show a notable rise in student loan debt as interest rates fell between 2009 and today.
  • Over the past decade, student loan debt has increased by 281 percent, from about $260 billion in the first quarter of 2004 to $990 billion in the first quarter of 2013.
  • Student loan debt now comprises the largest share of total nonhousing debt at nearly 36 percent, four times its share of total nonhousing debt in the first quarter of 2004."

Take this quiz to find out how much you know about student debt.

Editor's Note: The original version of this story posted on Aug. 14, 2013, failed to include quotation marks around the last three bullet points. The story was revised on Oct. 10, 2013, to include the quotation marks.

Matthew is a web producer for DeseretNews.com. Email: mhartvigsen@deseretdigital.com

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