July 7, 2013

Congress to revisit doubling of student loan interest rate

Sen. Angus King of Maine is among the senators who hope to win support for a bipartisan plan.

By Kevin Miller kmiller@pressherald.com
Staff Writer

(Continued from page 1)

Supporters of the Democratic plan to roll back subsidized Stafford rates to 3.4 percent insist their proposal would give lawmakers a year to craft a more comprehensive plan to lower student loan debts and control rising college costs.

In fact, some Democrats want to see the federal government stop earning a profit from student loans. A recent report by the nonpartisan Congressional Budget Office projects that, under the current policies, the federal government will take in $184 billion more than it spends on student loans between 2013 and 2023.

"We should not be burdening our students further. This is an economic question," Sen. Elizabeth Warren, D-Mass., told reporters just before the congressional recess. "Young people are hurt by student loan debt and, in turn, that hurts our economy. It's hurting housing, it's hurting economic recovery in general. But this is also a moral question. The United States government should be investing in our students, not charging them profits for getting an education."

But there are serious questions about whether Democrats can gain enough Republican support to move the bill forward this week. Critics also point out that Congress punted the ball in June 2012 when lawmakers voted to extend the 3.4 percent Stafford interest rate for an additional year. And one year later, Congress is in the exact same spot.

"My question is: What will we know in a year that we don't know now?" King said. "Let's solve this problem."

Instead, King is part of the bipartisan group pushing to tie student loan interest rates to the 10-year Treasury rate. Not only is the proposal nearly revenue-neutral by charging only enough additional interest to cover program costs; it would also lower interest rates this year for all borrowers, not just the subsidized Stafford borrowers who benefit from the Democratic plan.

"This would be fair to the taxpayers and it would be fair to the students ... because we would not be reducing the federal debt on the back of the students," Sen. Lamar Alexander, R-Tenn., said late last month. The other co-sponsors of the bill are Democratic Sens. Joe Manchin of West Virginia and Tom Carper of Delaware and Republican Sens. Richard Burr of North Carolina and Tom Coburn of Oklahoma.

The authors of the Democratic plan counter, however, that the bipartisan proposal lacks a cap on interest rates.

That's also a concern for college students, said Zaman with the U.S. Student Association. Although interest rates are currently low, they are bound to rise and the prospect of not capping rates is "very scary" to students, she said. And that's why her organization is supporting the leading Senate Democratic plan.

"We are hoping at the very least they can pass a one-year extension," Zaman said.

Kevin Miller can be contacted at 317-6256 or at:

kmiller@mainetoday.com

On Twitter: @KevinMillerDC

 

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