Today, the Senate is voting on a student loan interest rate “compromise” that will decide how much interest students borrowing subsidized Stafford loans will have to pay.
While rates for student borrowers will be lower in the short-term, the deal will ultimately raise rates on students, making it harder to pay for college. The deal also fails to address the fundamental issues of rising college costs and debt burdens at a time when these issues are more pressing to families than ever.
According to the New York Times
A Senate compromise bill that is supposed to address the harmful rate increase falls well short. The bill, supported by the White House, would temporarily lower interest rates, while raising rates in future years to make up for lost federal revenue. (Under interest rate caps included in the bill, rates on undergraduate loans in future years could rise as high as 8.25 percent.) Ms. Warren got it exactly right when she said the bill pits students against one another, requiring future college students to pay for the financial break enjoyed by students who precede them. “I think this whole system stinks,” she said, summing it up.Making the Student Loan Certainty Act slightly better is a provision offered by Sens. Reed (D-RI) and Warren (D-MA), that would cap most loans at the rate of 6.8 percent, making sure that students don’t pay any more interest than they’re already paying – which is double what students were paying last month, as Republicans decided to thwart legislation that would keep interest rates at 3.4% for Federal Stafford Loans.
Most important, the Reed amendment would keep these loans affordable. Young people are already coming out of college crippled by debt. Student loan debt surpasses both credit card debt and auto loan debt, and its a growing anchor not just on college graduates, but on the economy. Keeping that debt from getting more out of control should be paramount for the Senate. Reed's amendment would help.(Click here to urge your Senators to vote FOR this amendment, via Daily Kos and Our Time)
As it is currently, the government stands to make hundreds of millions of dollars off of students -- over the course of the next ten years.$715 million will go towards deficit reduction.
“The federal government is in the business of making money off of blue-collar students across the country,” Senator Markey said. “I’m going to oppose plans that substantially increase the rates that students pay in the future.”Congress needs to address how the federal government, in partnership with states, institutions, and students, can reduce costs and increase completion. Unfortunately, the compromise focuses, albeit poorly, only on the narrow issue of loan rates while ignoring these other pressing issues.
If there’s anything that this debate over student loans has shown us, it’s that Congress needs to enact a real long-term solution. Only then can students count on a more just interest rate structure and can finally stop worrying about rising tuition and debt burdens. Prompt reauthorization of the Higher Education Act – in which Congress addresses the issue of student loan interest rates as part of a larger focus on affordability and completion -- can help us all get there.
4:21 PM PT: This just in from Politico:
The Senate voted 81-18 to tie federal student loan interest rates to market rates. The bill fixes the interest rate for subsidized loans, which doubled July 1, and lowers interest rates this year for all borrowers taking out new loans. The House is expected to vote on the bill within the next week.