Washington –- A deeply divided Congress has failed to meet a deadline to stop a sharp spike of the interest rate charged on a popular college loan, ensuring that interest on those loans will double on Monday.
“Unfortunately, this is just another instance of partisan gridlock in Congress,” said Abe Scarr, director of ConnPIRG, a public interest group lobbying to keep college loan rates low.
The rate of the subsidized Stafford loan, used by more than 73,000 Connecticut college students to help pay tuition, board and other college costs, will jump from 3.4 percent to 6.8 percent July 1, the day a law that kept the rates low expires.
ConnPIRG estimates the hike will increase the cost of new loans for Connecticut students by $68.4 million. That translates into a $937 increase in debt per student, per loan.
There is no shortage of proposals on Capitol Hill that would reverse Monday’s doubling of the interest rates.
Rep. Joe Courtney, D-2nd District, sponsored one of them, a proposal that would keep the current rate frozen for two years.
To force Republican House leaders to put the bill on the floor, Courtney has gathered 195 signatures, all from Democrats, on a “discharge petition” that would force a vote. But 218 votes, a majority of the House, are needed.
Republicans say freezing the interest rate again would cost the federal government money.
But Courtney said it’s “not a budget buster.”
The House GOP approved a bill in May that would allow student loan rates to rise or fall from year to year with the government’s cost of borrowing.
But Democrats, including Courtney, say that would keep interest rates high.
Courtney conceded that solutions to the student loan problem aren’t imminent.
“Whether or not there’s a sweet spot here to move a bill, that’s the question,” Courtney said.
Two groups of senators on Thursday unveiled competing bills aimed at reversing Monday’s a spike in the student loan rate.
Sens. Joe Manchin, D-W.Va., Angus King, I-Maine, Tom Coburn, R-Okla., Richard Burr, R-N.C., and Lamar Alexander, R-Tenn., introduced legislation that would tie the interest rates on student loans to the 10-year Treasury note, then add an additional 1.85 percent.
“We’re tired of this being a political football,” Burr said. “This is a responsible program from the standpoint of the American taxpayer.”
Meanwhile, another group of senators, all Democrats, introduced a bill that would freeze the existing loan rate for a month to give Congress time to find a permanent solution, preferably as part of the reauthorization of a higher education bill.
“We have fallen. The United States now is the 14th in the world in the percentage of population that has graduated from college,” said Sen. Al Franken, D-Minn. “We can’t make things worse for our students.”
Sen. Elizabeth Warren, D-Mass., criticized the competing proposal introduced Thursday.
“Their plan moves the numbers around, but it still costs more for students,” she said.
Courtney said the good news is that Monday’s rise in the Stafford loan interest rate is not “irrevocable,” and could be changed retroactively.
But Courtney said he hopes Congress will agree to a fix before August, when most students take out Stafford loans.
But Marcus Harris, who studies at Central Connecticut State University and has taken out $25,000 in Stafford loans, said students should take matters into their own hands. He advocates being more judicious about borrowing money and starting to pay down loans while still in school.
Stafford loans are not required to begin to be repaid until months after a student graduates from college.
“We can’t depend on Congress,” Harris said. “I am very disappointed they are not looking ahead.”
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