U.S. CONGRESSIONAL News:
Washington, D.C. – Congressman Ben Ray Luján of New Mexico’s Third District voted today against a House Republican bill that will make it more expensive for students to attend college with federal subsidized Stafford student loans. With the interest rate on these loans set to double from 3.4 percent to 6.8 percent on June 1 action is needed to keep costs down for millions of students across the country.
“Rather than passing legislation that simply keeps interest rates on student loans where they are, House Republicans have come up with a disappointing plan that is actually worse that doing nothing at all,” Luján said. “In today’s economy, a college education is practically a necessity in order to open new doors and provide greater opportunities to for our young people to get ahead. Allowing interest rates to rise and the cost of attending college to increase will put a strain on families and make it harder for students to get the knowledge and training they need to get a good job.”
Under this legislation, interest rates on student loans will reset every year based on the 10-year Treasury note. The rate for Stafford loans will be the rate on the Treasury note plus 2.5 percent, while the rate on graduate and parent PLUS loans will be the rate on the Treasury note plus 4.5 percent. This variable interest loan will prevent students from locking in historically low rates, while facing uncertain rates year after year.
Over the next decade, $3.7 billion of the bill’s rate increase would go to the U.S. Treasury, creating a new tax on student borrowers. According to estimates by the Congressional Budget Office, federal student interest rates will be higher than current fixed rates for millions of borrowers seven of the next ten years. By the time next year’s freshmen graduate and start repaying their loans in 2017, the interest rate on that loan taken out during their freshman year is projected to more than double beyond today’s current rate to 7.4 percent.
The Congressional Research Service found that the impact of the Republican bill would leave students worse off than if no action was taken and interest rates doubled June 1. Students who borrow the maximum amount of subsidized Stafford loans over five years would pay $10,109 in interest payments under the Republican bill, $4,174 if rates were kept at the current 3.4 percent or $8,808 if rates are allowed to double to 6.8 percent in June.
Luján has cosponsored the Student Loan Relief Act to freeze the interest rates on student loans at 3.4 percent for the next two years. This will keep interest rates low in the short term while lawmakers work on a long-term solution as part of the upcoming Higher Education Act reauthorization.