Time Is Running Out To Stop Student Loan Rate Hikes

The clock is ticking on student loan interest rates. The rates for federally-backed student Stafford loans will double from 3.4 percent to 6.8 percent on July 1. And what has Congress done to help these already struggling students? Absolutely nothing. Student debt now totals $1 trillion, and Congress is still deadlocked when it comes to preventing an increase in the interest rate on student loans.

The House has managed to pass a bill, mainly on party lines, that would in fact seriously harm these students. This is Minnesota Rep. John Kline’s Smarter Solutions for Students Act, which ties the interest rate to the 10-year Treasury note, adding an additional 2.5 percent to Stafford Loans. It does introduce a cap on interest rates at 8.5 percent, but if this bill were law today interest rates on student loans would rise to 4.7 percent.

However there are two proposals currently in the House, these being the Student Loan Fairness Act sponsored by Rep. Karen Bass, D-Calif., and the Bank on Students Loan Fairness Act by Sen. Elizabeth Warren, D-Mass., and Rep. John Tierney, D-Mass.

Rep. Bass’s bill calls for student borrowers to pay 10 percent of their discretionary income on their debt for 10 years, after which the remaining debt would be forgiven. It also permanently caps loans at 3.4 percent, and suspends interest rates for unemployed borrowers and forgives loan debt owed by graduates who work in public service jobs. It has received support from the United States Student Association, and represents a realistic and supportive step forward for students drowning in debt.

Read more about this bill here (PDF)

For the Bank on Students Loan Fairness Act, the motivation is that students should not have to pay more than big banks do for loans, and so the interest rate for Stafford loans should be equivalent to the interest rate offered through the Federal Reserve discount window. The current rate offered to banks by the Federal Reserve is 0.75 percent. The Federal Reserve would supply the funding for these loans to the Department of Education. If this bill is passed, students would be able to get financial access to the education that they need.

Read more about this bill here (PDF)

And sign our petition to show your support for making loans rates for students the same as banks.

Finally, in a last ditch effort to keep rates from rising, Democrats in the House have filed a discharge petition bill under the leadership of Rep. Joe Courtney, D-Conn. The Student Loan Relief Act of 2013 would freeze existing rates of 3.4 percent for two more years while Congress attempts to work towards a more comprehensive solution. Although delaying the increase for another two years while ignoring the overall problem of soaring college costs is by no means an ideal solution, if Congress cannot come to an agreement by July 1 the rates will double. If anything, Congress should come together to protect students from an unfair increase of interest rates.

So far 195 Democrats have signed the discharge petition, but it needs 218 signatures – including those of at least 17 Republicans – to be moved to the floor for a vote.

The list below is of those Democrats who have yet to sign as of June 19:

  • John Barrow, D-Ga.
  • Edward Markey, D-Mass.
  • Jim Matheson, D-Utah.
  • Carolyn McCarthy, D-N.Y.
  • Bobby Rush, D-Ill.
  • Peter Visclosky, D-Ind.

If your representative is on this list, please urge that member to sign the discharge petition to prevent student loan rates from doubling on July 1st. Hopefully Congress can manage this much for our students.

And remember to sign our petition to give students the same borrowing rate as big banks.

 

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