(WASHINGTON) — For the average student graduating in 2011, college debt amounts to 60 percent of their annual income, according to a report released Tuesday by the Joint Economic Committee.
At around $1.1 trillion, student debt now exceeds auto loans and credit cards as the largest source of household debt, not including home mortgages.
The committee predicts that a doubling of loan rates would cost students, who borrow an average amount of about $27,000 to finance their education, an additional $2,600.
Congress is now locked in a fight over how to prevent student loan rates from doubling from 3.4 percent to 6.8 percent at the end of the month. But with fewer than two weeks remaining, there are still deep differences between Democrats and Republicans on the issue.
There is bipartisan acknowledgment that the student debt burden has become untenable, with both Republicans and Democrats touting the slogan “Don’t Double My Rate.”
President Obama’s plan calculates interest rates by adding a small percentage to the 10-year Treasury note, but locks the rates for the life of the loan.
House Republicans have a proposal that is similar to the president’s but it adds a larger percentage to the 10-year Treasury note. And their proposal allows rates to vary like an adjustable mortgage, a feature that has prompted Obama to threaten to veto the plan. Under the House Republican proposal, rates are capped at 8.5 percent.
Senate Democrats have put forward several proposals, but the primary one — sponsored by Senate Health Education, Labor and Pensions Committee Chairman Tom Harkin — would leave rates at 3.4 percent for two years, giving Congress time to find a long-term fix when they reauthorize the education bill.
So far, none of the Democratic or Republican plans have garnered enough support to reach the 60-vote threshold for passage in the Senate.
Even if rates are kept low for student loans, the sheer amount of debt, experts agree, hold young college graduates back from other activities like buying cars, houses, or pursuing graduate degrees.
In the Joint Economic Committee report out on Tuesday, Democrats offer several proposals, including loan forgiveness for students who pursue public service jobs, restructuring loans based on financial hardship, and converting private loans to federal loans so that students can take advantage of income-based repayment programs.
Copyright 2013 ABC News Radio
Madison Park, Keith Allen and Andreas Preuss, CNN