Spencer Pritchard, a first-year political economics student at University of California, Berkeley, has less control over his professional career than he'd like. That's because a major decision that will affect his life is in the hands of a body that's not always known for decision-making: Congress.
This July, unless Congress intervenes, Pritchard likely will owe $4,000 more than he would have in student debt upon graduation. That's because a 2007 law that kept federally subsidized Stafford loan interest rates low will expire this summer, leaving the rates to double from 3.4 to 6.8 percent. Pritchard already expected to owe $30,000, but an extra $4,000 might enough to necessitate a career change.
"I might have to take jobs that pay more instead of a job that I want to do," he said. "I want to be an organizer, but I might have to do something more lucrative. This situation makes me unsure of my future."
So far, 81,000 other people in or sympathetic to situations like Pritchard's have a signed a petition organized by Credo Action that aims to push the federal student-loan rate to the top of the congressional agenda. It calls specifically on Sen. Majority Leader Harry Reid (D-Nev.) to, "FIGHT to stop Republicans from doubling the interest rate on student loans."
What's at stake, the petition argues, is the country's economic future, since "millions of American students from working-class families are able to obtain a college education thanks to low-interest federal student loans."
But with the interest rate slated to double this summer, along with a slew of financial aid changes House Republicans propose, these goals may be in jeopardy. The budget Rep. Paul Ryan (R-Wis.) released Tuesday includes an automatic increase to the maximum amount of Pell Grant money each student is entitled to.
The Ryan budget moves Pell Grants from mandatory to discretionary spending, making future cuts and tweaks to the program possible. The bill also assumes both a repeal of the expanded Income-Based Repayment program, which allows college graduates to pay back debt in proportion with their salaries, and the doubling of Stafford-loan interest rates.
In 2007, a Democratic Congress used savings to gradually decrease the interest rate from 6.8 percent to 3.4 percent. Since then, the question of what happens when the money disappears has been an open one. But in 2012, as student debt reaches an average of $25,000 per student -- surpassing even credit-card debt -- it has taken on an even greater urgency.
"That policy fix never materialized," said Jamie Merisotis, president of the Lumina Foundation.
Last week, Rich Williams, a higher-education advocate at consumer group PIRG, organized students to write 130,000 letters on the issue to Congress. The same day, Sen. Jack Reed (D-R.I.) and Rep. Joe Courtney (D-Conn.) introduced a bill that would strike the expiration language from the 2007 law -- in effect preventing the interest rate from skyrocketing.
But so far, no one -- including Reed and Courteney -- has answered a key $5.7 billion question in a politically palatable way: Where will the money come from?
On Wednesday, Rep. Karen Bass (D-Calif.) introduced an amendment to the Ryan budget that would prevent the interest rate from doubling -- plugging the gap with deductions for corporate taxes and private jets, and tax cuts for millionaires, a measure unlikely to get through committee.
Democratic senators have been vague about their intentions. "Senator Reid thinks that middle-class families and hard-working students cannot afford to see the interest rates on their student loans increase on July 1, and he will work with Chairman Harkin and others to prevent this from happening," a Democratic senate aide wrote in an email in response to the Credo petition. Reid's office is expected to advance a message bill in a few months.
"I am deeply concerned about this issue and working with my colleagues to explore all legislative options to take action before the June 30th deadline," Sen. Tom Harkin (D-Iowa), who chairs the Senate Committee on Health, Education, Labor and Pensions, said in a statement to The Huffington Post. Harkin, too, provided no specifics on funding.
On the House side, Chairman of the Education and the Workforce Committee Rep. John Kline (R-Minn.) has said that while he doesn't think the loan rates should double, it's not the federal government's job. And there are grumblings on the Hill that if Republicans did take up the bill, they would suggest further curtailing Pell Grant eligibility to pay to keep the interest rates down. "That's a classic robbing Peter to pay Paul approach," Merisotis said.
But as Joel Packer, executive director of the Committee for Education Funding, an organization focused on achieving federal financial support for education, said, "the clock is ticking."
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Posted: 03/21/2012 7:19 pm Updated: 03/21/2012 8:07 pm