Rather than doom students with proposals that have long-term consequences, Senators Reed, Harkin, Reid, and Murray have come through with finding a solution that will benefit students in both the short and long term.
In an effort to protect taxpayers and shield college students from a sharp increase in federal Stafford loan interest rates, U.S. Senators Tom Harkin (D-IA), who chairs the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Jack Reed (D-RI), along with Majority Leader Harry Reid (D-NV), are introducing a fully paid-for bill to ensure student loan interest rates for more than 7 million undergraduate students do not dramatically increase this year.
The current fixed interest rate on Stafford federal subsidized loans is 3.4 percent, but that rate will double to 6.8 percent on July 1, 2013 unless Congress takes action. However, Congress is not expected to begin consideration of the reauthorization of the Higher Education Act, the primary law governing federal investment in higher education, until after the “doubling” deadline.
The Reed-Harkin Student Loan Affordability Act of 2013 (S. 953) would freeze need-based student loan interest rates for two years while Congress works on a long-term solution to slow the rapid accumulation of student-loan debt, and is fully paid for by closing three egregious tax loopholes. Specifically, the bill would: limit the use of tax-deferred retirement accounts as a complicated estate planning tool; close a corporate offshore tax loophole by restricting “earnings stripping” by expatriated entities; and close an oil and gas industry tax loophole by treating oil from tar sands the same as other petroleum products.
A number of organizations have gotten on board with the senators’ efforts. The Institute for College Access and Success released a statement after the bill was introduced today:
Unlike some recent proposals, this bill does not require students to bear much higher rates in the future to pay for low rates this fall. Instead, it’s a smart, short-term solution that keeps subsidized Stafford loans at the current fixed rate of 3.4% for two years. It pays for itself by closing unnecessary tax loopholes, two of which President Obama included in his most recent budget proposal.
And Campus Progress, U.S. PIRG, U.S. Student Association and Young Invincibles released a joint statement also applauding the senators' efforts, noting that the bill “bill creates a workable solution to keep student loan interest rates low until 2015 while Congress seeks to reauthorize the Higher Education Act and reach a comprehensive solution to the student loan crisis that is good for students.”