Aug 02 2013
On July 1st, interest rates on student loans doubled. Congress restored the lower rates, but not before this dramatic increase caused unnecessary panic for students, graduates and parents. The worst part is the rates never had to go up in the first place.
In May, the House of Representatives passed a bill to prevent the increase in federally subsidized student-loan interest rates. With a deadline looming at the start of July, why did it take so long for the Senate to act?
The answer lies in the fact that some within the Senate Majority are content with kicking the can down the road. They wanted to extend the current lower rate for another year and not worry about the ramifications. We tried that last year. We ended up right back where we started.
After a great deal of discussion between both sides, we were able to overcome this sticking point and pass a smart compromise solution to restore lower interest rates on student loans through the Senate with the support of a majority of Democrats and Republicans.
This long-term solution is better for students, parents and graduates. I am pleased that we were able to come to a commonsense agreement that addresses this issue well beyond the one-year extension previously proposed while lowering the rate for 100 percent of students next year and saving taxpayers money.
The bill sets the interest rate on all newly issued loans to the U.S. Treasury ten-year borrowing rate, plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency. These rates are locked in for the lifetime of the loan, but rates on new loans reset each year. According to the Congressional Budget Office (CBO), changing this to a market-based rate will save taxpayers $715 million over ten years.
As tuition rises, the dream of a college diploma often feels out of reach for many young Americans. This is why the Stafford Student Loan program is so important. Loans help students overcome obstacles they face when it comes to accessing a quality, affordable education.
Our compromise agreement shows that when everyone is willing to work together, we really can solve issues that matter to Americans. However, the crisis with our higher education system goes beyond the rates of student loans. The soaring cost of college needs to be addressed in the same bipartisan manner.
Furthermore, the sluggish economy has hit young Americans especially hard. The employment-to-population ratio for young adults is at its lowest level since 1948. Over half of Americans under 25 who hold a bachelor’s degree are unemployed or underemployed and nearly 25 million adults live at home with their parents, not out of choice, but because they can’t find work or earn enough to survive on their own. Any way you cut it, college graduates ready to chase the American dream have a huge roadblock awaiting them in this economy. That needs to be fixed.
The student loan interest rate fix is just a start. While giving Arkansas's students access to the very best education possible at an affordable rate, we must also work to ensure that there is a healthy job market waiting for them after graduation. This must remain Congress’s focus as we move forward.