Don't Burden Students with Even More Debt

On July 1, the interest rate for subsidized Stafford loans is set to double from 3.4% to 6.8% -- unless Congress acts. The House of Representatives is scheduled to vote tomorrow, May 23, on a bill (H.R. 1911, sponsored by Reps. John Kline and Virginia Foxx) that appears to address this rate increase but would actually make loans much more costly for students. Under the bill, all new federal student loans would have variable interest rates that are projected to rise nearly three percentage points (to 7.4%) by the time this fall's freshmen graduate from college and make their first loan payment.

In fact, for students who graduate in four years and borrow the maximum amount ($27,000), the bill would actually cost them more than if rates were allowed to double on July 1. It then takes the billions of dollars more that students would have to pay for loans and uses it pay down the government's own debt. To make matters worse, the rate on every loan would change each year -- like on credit cards and the risky variable-rate mortgages that contributed to the financial crisis. This means the monthly payments required under most plans would change each year as well.

Senators Jack Reed and Tom Harkin have introduced legislation (S. 953) that would keep subsidized Stafford loans at the current fixed rate of 3.4% for two years and pay for itself by closing unnecessary tax loopholes. They plan to offer it as amendment on the Senate floor this week.

With less than six weeks until student loan rates are set double to 6.8%, their amendment would protect students while giving Congress and the Administration time to develop comprehensive reforms that truly keep federal student loans affordable -- over the long term -- for both students and taxpayers.


Message
to the House

I'm writing to ask you to oppose H.R. 1911 (Kline-Foxx bill), which would make federal student loans much more expensive. Under the bill, new loans would have variable interest rates that are projected to rise nearly three percentage points (to 7.4%) by the time this fall's freshmen graduate from college and make their first loan payment. In fact, for students who graduate in four years and borrow the maximum amount ($27,000), the bill would actually cost them more than if rates were allowed to double to 6.8% on July 1.

By making college even more costly for students and families, this bill undermines the purpose of federal student aid and our nation's need for an educated workforce. Instead, I urge you to support legislation that stops rates from doubling on July 1 to provide time to develop comprehensive reforms that truly keep federal student loans affordable for both students and taxpayers, today and in the future. Both the Reed-Harkin bill (S. 953) and the Warren-Tierney bills (S. 897/H.R. 1979) would accomplish this goal.

Please oppose H.R. 1911.

Message to the Senate

I'm writing to ask you to cosponsor the Reed-Harkin bill (S. 953) and support their amendment to stop interest rates on subsidized Stafford students from doubling on July 1 from 3.4% to 6.8%. Their common-sense solution would freeze student loan interest rates for two years and pay for itself by closing unnecessary tax loopholes. With less than six weeks until student loan rates are set double, their amendment would protect students while giving Congress and the Administration time to develop comprehensive reforms that truly keep federal student loans affordable for both students and taxpayers.

Rising college costs and student debt burdens are serious problems for students, their families, and the economy as a whole. Our nation needs an educated workforce that can still afford to buy homes, start families, create businesses, and save for retirement.

Please support the Reed-Harkin bill to keep college and federal loans affordable instead of driving students deeper into debt.