Cap Student Loan Interest at 1%. Loan Revenue Will still be 900% of Required Cost of Servicing All Loans

The current student loan debt totals $1.74 trillion dollars, which needs to be repaid. The average borrower has $38,000 in loans.

The government spends $2 billion a year servicing student loans. Capping student loan interest to 1% will generate $17 billion four-hundred million; nearly nine times the required amount to service the loans.

Currently, an average borrower is paying 8% on their $38,000 loans. Over a ten year repayment this works out to nearly $500 per month ($6,000 a year) and $17,000 paid to interest. The schedule requires the average American making $60,000 a year to spend 10% of their gross income on repayment.

If the same borrower repays the same 8% loan over 20 years reduces their payment to $317 a month (about $4,000 a year or 6.66% of gross income) but pays $38,000 in interest over that time.

By reducing the interest rate to 1% the government can still afford to service current loans while we rework the cost of public universities and student loan programs.

At 1% interest the same borrower from the previous examples pays $332 a month for ten years and less than $2,000 in interest OR $175 a month for 20 years and $4,000 in interest.

Using this policy, the average American will have an additional:

$180 per month for 10 years or $15,000 dollars over the life of the loan. OR $150 dollars per month for 20 years or $34,000 over the course of the loan.

The economy will only benefit from reducing the student loan interest rate, and there is no need to abolish the current loans or for the government to foot the bill.

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The issue began when the government took over student loans. Return this to the economy where borrowers will look at what cost is being assumed versus the income they will have post degree as the deciding factor. This then forces schools to provide a degree at a reasonable price for loans to be available to its students. When government provides money at low rates regardless of ability to pay back the loan you end up with prices that get out of control.