Courtney pushing student-loan interest rate freeze
Washington –- Rep. Joe Courtney is in the middle of a partisan fight over how to spare college students from a dramatic hike in the interest rate of a popular student loan.
Interest rates on Stafford loans will double from 3.4 percent to 6.8 percent for thousands of Connecticut college students unless Congress acts before July 1.
Courtney, D-2nd District, and other Democrats want to freeze the Stafford loan rate at 3.4 percent for two years. House Republicans have rejected that plan in favor of another they hope to vote on this week.
Under the Republican plan, Stafford loan interest rates would be recalculated every year and pegged to 10-year Treasury notes, plus 2.5 percentage points.
President Obama’s endorsed a similar idea in his budget. He proposed a “cost-neutral reform” that set interest rates so they more closely follow those of the financial markets — currently at historic lows.
But Courtney said tying the loan rate to the interest on Treasury notes would eventually raise the interest rate on Stafford loans to record levels. He cited Congressional Budget Office and Congressional Research Office studies that predicted those increases.
“In the simplest terms it costs students more money than if we did nothing at all,” Courtney said.
He said a permanent solution to the problem should be found. But since there’s no time to do so before July 1, Courtney said the best thing is to freeze the current rate until a long-term higher education bill could be considered by Congress.
Eric Bergenn, an economics major at Central Connecticut State University, said Stafford loans are paying for most of his college costs, which were about $8,300 this year.
He said he hopes Congress acts fast to prevent an interest rate hike, and he believes other students do, too.
“I would definitely affect me,” Bergen said.
At the University of Connecticut, about 11,200 undergraduates have Stafford loans. The average loan amount is $8,650 per year.
Across the nation, about seven million college students have Stafford loans.
Courtney and two other House Democrats said at a press conference Tuesday that, according to the Federal Reserve Bank, American students hold $1.1 trillion dollars in student loan debt, exceeding the nation’s car loan and credit card debt.
“It’s an avalanche of borrowing that is going to inhibit people’s decisions in terms of buying homes, starting businesses, and any chance to have a middle class existence,” Courtney said.
The Republican plan may pass the House this week. But the Senate is considering the plan promoted by Courtney.
Sign up for CT Mirror's free daily news summary.
Free to Read. Not Free to Produce.
The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.YES, I'LL DONATE TODAY