Senator Jack Reed (D. RI) is not a big fan of the Senate's student loan deal:
http://www.huffingtonpost.com/...
A bipartisan Senate accord supported by the White House to overhaul the federal student loan program is forecast to boost government profit and increase borrowing costs in the coming years, leading student groups and some Democrats to denounce the deal.
The compromise, reached by eight senators and blessed by the White House on Thursday, would result in an immediate reduction in borrowing costs under the federal student loan program -- temporary savings that would be paid by graduate students and parents beginning in 2015, according to estimates derived from the White House’s most recent budget update.
Some undergraduate students will immediately pay more relative to borrowing costs that prevailed during the most recent school year, while the vast majority are forecast to pay more in the next five years, perhaps as early as 2016.
Many Senate and House Democrats, however, preferred a system tied to the government’s cost to borrow over a much shorter period, which would have resulted in cheaper rates for students and their families.
“What we'll see is that a generation of students ... will be paying a lot more for their student loans,” a result that will “add to the debt of these students and their families, and it will restrict their ability to become ... not only qualified workers in our economy but also the people that drive the economy,” Sen. Jack Reed (D-R.I.) said on the Senate floor.
“This is not the right approach going forward,” Reed added. - Huffington Post, 7/18/13
More below the fold.
Here's a little more background info:
http://www.providencejournal.com/...
Under the deal, student borrowers will see interest rates reduced to levels near those that expired last month. The legislation offered by a bipartisan group of senators largely follows the approach initially outlined by the Obama administration, which would base student loan rates on the 10-year Treasury note rate.
Each loan would carry a fixed rate. According to estimates provided by the bill's authors, the rate for all undergraduate student loans would be 3.86 percent this year.
The rates at which loans would be offered in subsequent years would adjust with the bond market. They are forecast to reach 7.25 percent by 2018 as interest rates go up with an improving economy. The plan would cap the rate at 8.25 percent on undergraduate loans to protect against increases beyond those forecast.
Speaking on the Senate floor, Rhode Island Democrat Reed noted that the legislation would increase borrowing costs for future students who depend on the federally subsidized loans.
"We need to ensure our students have an opportunity to earn a degree without mortgaging their future," Reed said. - Providence Journal, 7/18/13
Reed helped author the 2012 law that prevented interest rate increases on new loans to millions of college students and kept rates at 3.4 percent. He has also co-authored the the Responsible Student Loan Solutions Act of 2013 with Senator Dick Durbin (D. IL) and U.S. Representatives John Tierney (D-MA) and Joe Courtney (D-CT):
http://www.reed.senate.gov/...
The Reed-Durbin-Tierney-Courtney bill would offer adjustable rate loans for college students with a cap on the maximum interest rate that could be charged to protect borrowers during periods of high interest rates. Rates would be set every year based on the 91-day Treasury bill, plus a percentage determined by the U.S. Secretary of Education to cover program administration and borrower benefits. Under the plan, interest rates for need-based, subsidized federal loans would be capped at a maximum of 6.8 percent. Rates for unsubsidized and parent loans will be capped at a maximum of 8.25 percent. The bill will also allow borrowers who are stuck with high fixed-rate federal student loans to refinance those loans into the new variable rate loan with a cap.
The 91-day Treasury bill rate is used as an index for various variable rate loans. Currently, the average rate is .040 percent. One month ago it was .065 percent and one year ago it was .090 percent. The Congressional Budget Office (CBO) projects that rates will begin to rise in 2014, reaching 2.97 percent by 2018. Current projections of administrative costs run at about 2 percent of the total loan volume.
The federal government provides student loans to increase the number of Americans who attain college degrees -- not to generate revenue. CBO also notes that the federal government is generating a profit on its student loan programs with the current interest rate structure for federally subsidized Stafford loans.
Reed is also planning to offer an amendment to the bill to cap all Stafford loans at 6.8 percent and 7.9 percent for the parent PLUS loan.
I thank Senator Reed for staying strong on this issue. In the mean time, you can join Campaign For America's Future's campaign to keep student loan rates low:
Horrible news. A Senate deal has been struck that could saddle the next generation with even more student loan debt.
A vote is imminent. We need to move fast to protest it.
CLICK HERE to tell your senator: Vote “No” on raising student loan rates:
http://staging.ourfuture.org/...
Instead of subsidizing low rates and investing in our children’s future, this deal would let the market set the rates.
Instead of ending the practice of government profiting off of student debt, this deal lets the government profit more.
Senators claimed to be hopping mad that the recent gridlock let rates double from 3.4% to 6.8%. But this deal sets a cap on rates at a brutally high 8.25% for undergrads and 9.5% for graduate students.
CLICK HERE to tell your Senator: Vote “No” on raising student loan rates:
http://staging.ourfuture.org/...
The vote is coming soon. This will be hard to stop. But we have to make it clear this deal is not acceptable to students and families across the country.
Tell your senator to vote against the deal and pass a one-year extension of the 3.4% rate instead. That will give the Senate time to get serious about making college affordable.
We need your voice now.
Sincerely,
Robert Borosage
Co-director, Campaign for America’s Future
You can click here to sign the petition:
http://staging.ourfuture.org/...