The Hill: Senate student loan bill lets students down
Today, the Senate is expected to break its logjam over the doubling of student loan interest rates. On July 1, interest rates on Federal Stafford loans doubled from 3.4 percent to 6.8 percent. The Senate plan would peg interest rates to a 10-year Treasury note plus 2 percent for subsidized and unsubsidized Stafford loans, 3.6 percent for graduate loans and 4.6 percent for PLUS loans.
Caps would be included but they far exceed the previous 3.4 percent cap borrowers enjoyed before the rates doubled. For undergraduates, the cap would be just over 8 percent, 9.5 percent for graduate students and more than 10% for PLUS loan borrowers.
Some are hailing the bipartisan compromise as a victory, noting the legislative process can move forward with Senate passage of a bill that will be merged with legislation already passed in the House.
In today’s Washington, it’s refreshing to see the legislative process work as intended instead of the usual partisan rancor Americans have grown tired of.
However, on this issue Congress is still falling short of its obligation to the American people.
When it comes to standing up for our youth we have a moral obligation to not only make the process of governing work, but also to ensure that it works to the benefit of those most in need.
Based on that metric, both the House and Senate legislation miss the mark. Each bill allows the federal government to unnecessarily continue to make billions in profits off the backs of students. Some estimates show the profits as high as $184 billion over the next decade.
Neither bill links government profits to the actual cost of running the student loan program, allowing for any excess profits to be put toward deficit reduction.
It’s both immoral and irresponsible to tax the educational investments of young people to help fund the federal government. The federal government should be a constructive partner in spurring reforms that help students and borrowers to attain a college education - not serving as a loan shark.
This year alone the government is poised to pocket $51 billion in profits from student loans. For context that’s more earnings than Exxon Mobil, Apple and Chevron.
Instead of serving as a counter balance to the egregious House legislation, the Senate is preparing to send a signal that it’s permissible for the budget to be balanced once again on the backs of those most in need.
The Senate deal will use student loan profits to reduce the deficit by more than $700 million instead of investing those resources back into the system through increases to Pell Grants and other measures that help low income and middle class families send their children to college.
So where do we go from here? If the fight over student loan interest rates has taught us anything, it’s that there is a groundswell of grassroots support from Americans of all ages and incomes demanding fairness in the student loan lending process.
Many Americans take issue with the government earning profits on the backs of students. They are further enraged by the idea of big banks getting much better interest rates than students.
The key now is not to lose our focus in the wake of one setback. The debate over interest rates was always just one fight in the much larger battle for commonsense reforms in funding higher education.
Facts are on our side and most Americans don’t need to be persuaded to support our position. They just need to know what to do about it and how to get involved.
These latest efforts must be channeled into sparking a national dialogue ahead of next year’s Reauthorization of the Higher Education Act. A national agenda should be honed around college affordability and how reinvesting government profits from student loans can play a role in financing some of those key reforms in partnership with state and local governments.
This is only the beginning and there is much more work to be done in the coming months until every American has the opportunity for an affordable college education.
Congresswoman Karen Bass (D-Calif.) represents California’s 37th Congressional District. The United States Student Association is the oldest and largest student group in the country. U.S. PIRG is a consumer watch group countering the influence of powerful special interests. Sophia Zaman is President of USSA and Christine Lindstrom is the Higher Education Program Director for U.S. PIRG
This article was originally published in The Hill.