Obama Administration, House Dems Push To Prevent Student Loan Rate Hike

A Congressman who successfully rallied Democrats in a government shutdown fight last summer hopes he can drum up support once more as he attempts to stop federal student loan interest rates from doubling in July.

Rep. Gary Peters (D-Mich.) is working with Rep. Joe Courtney (D-Conn.) on bill H.R. 3826 to keep the interest rate for federal Direct Stafford Loans at 3.4 percent. If the bill fails to pass, student loan interest rates will jump to 6.8 percent on July 1, when the 2007 law that caps interest at its current rate expires.

In a letter circulated around Capitol Hill this week and obtained by The Huffington Post, Peters and Courtney make their case for H.R. 3826. They write:

"When Treasury bonds are being sold at 2 percent and mortgage rates can be had for less than 4 percent, it is outrageous to make college students pay two to three times the going interest rate. As parents and grandparents, it is unconscionable that we would even consider putting this burden on our children. As America faces an incredibly competitive global economy, it makes no sense for Congress to shortchange investing in the college education necessary to ensure that the United States will continue to have the most highly educated workforce in the world."

Peters gathered support in a similar fashion last summer when he sought to prevent cuts to an auto industry loan program in a government spending fight.

Peters and Courtney aren't the only ones pushing to cap student loan interest rates. It appears the Obama Administration has their back as well.

The New York Times reports the White House will encourage Congress to pass the legislation keeping federal student loan interest rates down. President Obama is expected to speak about the issue during his weekly address on Saturday, and will also raise support in visits to the University of North Carolina at Chapel Hill, the University of Colorado at Boulder and at the University of Iowa next week. Advocates should also keep a lookout for the administration's social media campaign on the issue by searching for and using the hashtag #DontDoubleMyRate.

The 2007 law capping student interest rates was passed with 77 Republicans voting in favor of it. Now, Rep. John Kline (R-Minn.), chair of the House education committee, has expressed opposition. Kline referred to the discounted interest rate earlier this year as a "ticking time bomb set by Democrats."

Kline's office issued a statement Friday morning clarifying his stance:

“Bad policy based on lofty campaign promises has put us in an untenable situation. We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers. I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run –- which is what put us in this situation in the first place."

Kline said Democrats haven't offered meaningful solutions to fund their proposal. He cited the Congressional Budget Office's statement that extending the 3.4 percent interest rate on subsidized Stafford Loans made to undergraduate students for one year would cost taxpayers roughly $6 billion.

In March, 130,000 college students sent letters to lawmakers asking them to act to keep Stafford loan interest rates down.

What else has been proposed in Congress to deal with student debt and financial aid? Check it out in the slideshow below.

Related on HuffPost:

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• Ryan Budget Whacks Pell Grants, Makes Federal Student Loans More Expensive

  Pell grants are the financial aid packages given to low-income college students which they do not have to pay back. Students who receive them are not required to attend a public college or even stay in their homestate, so that freedom has made it a fairly popular program. However, Rep. Paul Ryan's <a href="http://www.huffingtonpost.com/2012/03/27/pell-grants-paul-ryan-budget_n_1383178.html" target="_hplink">proposed federal budget would cut $200 million</a> from the program, and potentially eliminate help for more than 1 million students. Currently the maximum Pell grant award is $5,645, which only covers about a third of the cost of attending college. Ryan's budget would cut Pell grant eligibility for students who attend classes on less than halftime. His budget would also make it so college students with federal student loans would have to start paying interest on their loans while still in school.

• Student Loans And Bankruptcy

  Thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, virtually no student loans can be discharged in bankruptcy. So in practical terms, if you have $200,000 in debt for credit cards, car payments, or mortgage payments from a private bank, they can all be wiped away in bankruptcy. However, student loans from the same private lender cannot. The argument is that you can take away someone's car when they file bankruptcy, but you cannot take away their education. The Senate <a href="http://www.usnews.com/education/blogs/student-loan-ranger/2012/03/28/looming-student-debt-crisis-hits-the-senate" target="_hplink">heard testimony</a> on March 20 about whether or not this should be changed. Sen. Dick Durbin (D-Ill.) is <a href="http://www.bloomberg.com/news/2012-03-20/durbin-urges-private-student-loans-be-discharged-in-bankruptcy.html" target="_hplink">leading the charge for bankruptcy reform</a> that would allow students to get rid of their student loan debt when and if they file bankruptcy.

• Student Loan Forgiveness Act

  <a href="http://www.huffingtonpost.com/2012/04/10/student-loan-forgiveness-act-2012-hansen-clarke_n_1415910.html" target="_hplink">HuffPost Detroit reported</a> on the Student Loan Forgiveness Act, put forward by Rep. Hansen Clarke (D-Mich.): <blockquote>H.R. 4170 would forgive student loan debt for those who have paid 10 percent of their discretionary income toward their loans for 10 years and would cap interest on federal student loans at the current rate of 3.4 percent. Individuals who go into teaching, public service or practice medicine in underserved areas would have their debt forgiven after only five years. "Everyone tells us to go to school and work hard and we'll be rewarded for our dedication," Clarke said. "But the promise of a dream can turn into a nightmare for so many people."</blockquote>

• Petition For Student Loan Forgiveness Act

  An <a href="http://signon.org/sign/support-the-student-loan" target="_hplink">online petition</a> hosted by MoveOn.org has nearly reached its goal of attaining 875,000 signatures in support of the Student Loan Forgiveness Act. The Forgiveness Act would allow students who make payments equal to 10% of their discretionary income for 10 years to have their remaining federal student loan debt forgiven. According to talking points included in the petition, "If you have already been making payments on your student loans, your repayment period would likely be shorter than 10 years. The amount you have already paid on your student loans over the past decade would be credited toward meeting the requirement for forgiveness."

• Student Loan Interest Rates: They May Double

  A 2007 law that kept federally subsidized Stafford loan interest rates low will expire this summer, <a href="http://www.huffingtonpost.com/2012/03/21/student-loan-interest-rate_n_1371236.html" target="_hplink">meaning the rates would double</a> from 3.4 to 6.8 percent. Students have already gone to Capitol Hill to protest and most Democrats are in favor of keeping the interest rates low. Sen. Jack Reed (D-R.I.) and Rep. Joe Courtney (D-Conn.) proposed a bill that would get rid of the expiration date on the discounted student loan rate. However, Republicans argue it would cost the federal government $5.7 billion, which they say is way too much. If Congress does not act, the interest rates for federal student loans would increase on June 30, 2012.

• No Definition Of Credit Hours

  Republicans passed a bill out of committee that would repeal minimum standards for a credit hour and removes the need for a state to authorize higher education institutions in their state. Rep. Virginia Foxx (R-N.C.) <a href="http://edworkforce.house.gov/News/DocumentSingle.aspx?DocumentID=281565" target="_hplink">contends this would allow</a> greater flexibility for schools, Democrats counter that it opens the door for fraud. The federal definition of a <a href="http://democrats.edworkforce.house.gov/blog/overturning-accountability-and-integrity-measures-higher-education-programs-facts-hr-2117" target="_hplink">credit hour is the basic unit</a> underlying the distribution of federal student aid. Rep. Tim Bishop (D-N.Y.) <a href="http://www.insidehighered.com/views/2012/03/15/essay-argues-against-bill-overturn-us-rules-higher-ed-oversight#ixzz1qXWVjWPA" target="_hplink">wrote on Inside Higher Ed</a> that the bill represents a threat to the government's ability to police institutional fraud in the higher education industry. In regards to eliminating the requirement for state authorization for colleges, Bishop said "the bill would make it impossible for states to guarantee the quality of programs operating inside their borders."

• Pell Grants Are Now Semester Limited

  A rule from the Obama administration <a href="http://www.wtva.com/news/local/story/Longtime-students-may-be-shocked-at-new-law/nDgQP5Yu9ES5KSkIJJYXiw.cspx" target="_hplink">will limit the use</a> of Pell grants to 12 full-time semesters, or approximately six years of studying. The new rule goes into effect July 1, and the Department of Education will contact students in April who have used up their allotted time in school.

• Investigate The Federal Loan Programs

  Congressional Republicans <a href="http://www.businessweek.com/news/2012-03-28/republicans-call-for-congressional-probe-of-student-loan-program" target="_hplink">recently sent a letter</a> to the Government Accountability Office urging them to investigate the federal student loan program and whether they are "appropriately managing student debt." The federal government has turned to private debt collectors to collect money owed for student loans, while $67 billion of student loans are now in default, according to Businessweek. Those contractors out there trying to get students and graduates to pay up are paid on commission. The GOP <a href="http://edworkforce.house.gov/UploadedFiles/03-27-12_-_GAO_Letter_on_FFEL.pdf" target="_hplink">letter said</a> they were concerned borrowers who have defaulted are not getting adequate assistance to get back on track repaying their loans. The letter was signed by Rep. John Kline of Minnesota, chair of the House education committee; Sen. Michael Enzi of Wyoming, the ranking member of the Senate education committee; Reps. Virginia Foxx of North Carolina and Judy Biggert of Illinois; and Sens. Lamar Alexander of Tennessee and Tom Coburn of Oklahoma

• The CFPB Will See You Now

  The newly created Consumer Financial Protection Bureau said it will <a href="http://www.huffingtonpost.com/2012/03/05/student-loan-complaints-cfpb_n_1322037.html" target="_hplink">field complaints</a> about billing, confusing advertising and collection by private student lenders, and relay complaints about federal loans. "Getting a higher education can mean taking on significant debt - a big decision with a lot of consequences," said CFPB Director Richard Cordray. It's safe to say the CFPB is pretty concerned about student debt among American college students. Rohit Chopra, the student loan ombudsman for the CFPB, had a grim forecast recently in a <a href="http://www.huffingtonpost.com/2012/03/22/student-loan-interest-rate_n_1372506.html" target="_hplink">blog post about student debt</a>: "Students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans. If current trends continue, there will be consequences not just for young people, but for all of us."

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Comments

[Kredy Nicolsan]

03:09 AM on 06/30/2012

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[tonymoschetti]

10:47 AM on 04/27/2012

"Obama Administration, House Dems Push To Prevent Student Loan Rate Hike"

Wow, thanks guys. But wait, here is the REAL story on this latest bit of demagoguery from the Charlatan "occupying" the White House.

"The interest rate increase sounds serious. After all, there are 39 million Americans with student loans owing over a trillion dollars of debt, and interest rates doubling from 3.4 percent to 6.8 percent would be a huge hit at a time when households are already struggling."

"Serious, except that the president's plan would apply only to those 23 million loans being borrowed directly from the federal government. Except that not all of those would benefit; it would apply only to the 9.5 million loans being borrowed through the so-called subsidized Stafford loans. Except the lower rate would apply only to new borrowers who apply this year. Except that no payments are made until after graduation, so it would not help anyone for several years. Except that it would lower monthly payments by an average of only $7."

I honestly don't know how this man can look at himself in the mirror without thinking, " I got em again. They are buying this B.S."

[PeaceUponUs]

02:13 PM on 04/24/2012

The 110th Congress passed this lousy Bill knowing it would eventually double the rates. They then encouraged Student and families to sign up for more debt. Now it is time to meet the Maker, to Pay the Piper, to answer "Where does the Buck Stop.

The 110th Congress, both the House and the Senate were controlled by the Democrats. Obama himself has, since the passage of this Law, used his Bully Pulpit to convince Americans to go deeper and deeper into debt. Now, look what the Democrats have done to us!

[DelaFletch]

09:23 AM on 04/24/2012

If I'm an oil corporation whose profit is recorded in billions... I get subsidized. If I make over 250,000 dollars per year, my taxes will only get lowered and stay lowered. If I'm an American student trying to use higher education get a leg up on the global society (which is eating our lunch), my fees go up. This makes sense. I'm not a magical "job creator," right?

Ayn Rand must be laughing her tail off.

[PeaceUponUs]

02:16 PM on 04/24/2012

Oil Companies only get the same deductions ALL companies get. They are not "subsidized". It is only a Tax Deducation kinda of like when you claim the number of people in your household. The Oil Companies deduct the expenditures for investing in the wells. It's called "infrastructure". Just like building a road (which is deductable) or a bridge.

[liberalpolicysucks]

02:44 AM on 04/22/2012

Student Loan forgiveness=stealing...

so does not paying your loans back...

same thing.

[Sir Dinadan]

04:27 PM on 04/22/2012

College is a lie. It doesn't give the graduate anything but debt slavery. They can't even declare bankruptcy. Shame on you.

[loan user]

10:24 PM on 04/21/2012

The rate for direct subsidized Stafford loans for graduate students is already 6.8%. Why shouldn't undergraduates pay the same??????

[nfrancone]

08:05 PM on 04/21/2012

The petition pertaining to the doubling of interest rates is :
http://signon.org/sign/support-bill-hr-3826.fb7?source=c.fb&r_by=4164334
Sign this petition to let congress know they cannot ignore this issue!

[olitenup]

03:03 PM on 04/21/2012

I was a single parent and paid 8% on my student loans in the 80s and 90s. And they were paid off.

[Garibaldus]

12:29 AM on 04/25/2012

When you went to the school in the 80s and 90s (as I did) tuition was a tiny fraction of what it is now, and the economy wasn't so completely in the tank that graduates were unable to find jobs.

It's so bad now that large percentages of American graduates *even at elite institutions* are emigrating from the United States, especially if they have European ancestry and can demonstrate that they're ethnic diaspora. (Scandinavia, Italy, Germany, France, Switzerland, Finland, Estonia and other countries have policies to make it easy for their diaspora in the US to return to their ancestral countries and learn the language esp. German). Try to adjust to the situation facing graduates TODAY not what it was decades ago- it's much tougher for people coming out of school these days.

[bklynbob]

01:07 PM on 04/21/2012

OK, so women, hispanics, and now students.....great collection of people to allienate, GOP.

[NHGUY2]

08:32 AM on 04/21/2012

We need to keep the loan rates as low as possible. Our nation needs a better educated workforce.

[Quis Custodiet]

05:44 AM on 04/21/2012

So much for the finance sector being staffed with highly capable professionals. Apparently, they need the government to provide safe bets for them in what has become the "knowledge based" economy, which by necessity demands for those of us who are intellectually inclined to attend college.

I guess the circular flow of FDI has slowed down?

[lisakaz2]

03:33 AM on 04/21/2012

Millionaires don't care that they've cut out any educational funding for colleges, thereby making them accessible to the rest of America only via loans. What were a few thousand dollars in the 80s became tens of thousands by the 90s and has continued to be high. They want higher education to only be available to the rich. I've seen this even in the job market for PhDs. It used to be you needed a book for tenure; now you need a published book just to get a job. Who can afford the time/research expenses to write a book beyond one's dissertation? Only ppl without monetary concerns.

[Quis Custodiet]

05:47 AM on 04/21/2012

Well, the cost of education is meant to be prohibitive. Don't want any riff-raff potentially making cozy with the sons or daughters of the rich and influential, now would you? I mean...peasants should breed among themselves.

This whole education thing has gotten them thinking though, and thinking, as we all know, is dangerous. Education carries the risk of someone stumbling across the breadcrumbs of truth scattered out there; and boy, is the truth ugly.

[lisakaz2]

04:49 PM on 04/21/2012

Is meant to be? No, that's not the way it was -- not when I got an undergraduate degree. People who belonged in college by their abilities went to colleges, regardless of money. I went to Northwestern; my family was not wealthy, though the background of a lot of students there was that. But what you say sure seems to have been the attitude of some there and now I'd say a lot more of the wealthy believe this -- that their ---- don't stink because they're rich. The problem was that back then, because students kinda looked the same, it wasn't easy to tell the financial aid types from the kids of the 1%.

[Lifer59]

11:52 AM on 04/22/2012

I would say the cost of college today is linked to the amount of money the government is willing to loan. The more money available, the more colleges will charge to absorb the excess. Let's bring some reasonableness back to higher education by linking loans to the type of degree and the risk. Is it better to "invest" in an engineering degree or to pursue a degree in [Insert Liberal Cause] Studies degree.