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On July 1, the interest rate on subsidized Stafford student loans will double from 3.4 percent to 6.8 percent if Congress does nothing, increasing college costs for over 7 million students by $1,000 per student, per loan. Below is a statement from Campus Progress Action, the United States Public Interest Research Group, the United States Student Association, and Young Invincibles on the introduction of H.R. 1911 in the U.S. House.
Yesterday, Representative Kline (R-MN), chairman of the House Education and Workforce committee, introduced a student loan reform package, H.R. 1911, which pegs student loan interest rates to the market, moving away from the fixed rates that are set by Congress.
Under this plan, student debt levels will increase. While we are pleased that the proposal includes a cap on interest rates, a critical feature to indicate to borrowers that their loans will not rise past certain limits, the interest rates on some loans could still rise to double digits - far too high.
Moreover, a low-income borrower enrolling in college next year would pay less on her student loan under current law than under the Kline plan even if rates are allowed to double, because her rate would rise again by the time she graduates. Students, their families, and workers need to see Congress making college more affordable, not less.
Federal student loans are set to generate $34 billion in revenue for the federal government next year. This proposal would lock in high revenues, and takes another $3.7 billion for further deficit reduction. We should not increase student debt to pay down the deficit. Students are already doing their part for deficit reduction by studying hard so they can earn more, pay more in taxes, and repay their student loans.
We will continue to work with lawmakers on both sides of the aisle to craft a solution before July 1 that keeps interest rates low for students.
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