After the Senate voted down two proposals Thursday to keep interest rates on new, subsidized Stafford loans from doubling from 3.4 percent to 6.8 percent on July 1, student advocates are expected to continue drumming up support for the #DontDoubleMyRate campaign currently being championed for the second summer in a row by President Barack Obama.
These groups are supporting the effort to keep rates low just two months after they blasted the proposal to tie federal student loan interest rates to the yield on 10-year Treasury bonds included in Obama's FY 2014 budget.
An April 10 joint statement from several student advocacy groups -- OurTime.org, Rock the Vote, Roosevelt Institute Campus Network, National Campus Leadership Council, U.S. Public Interest Research Group and Young Invincibles -- voiced united opposition to the plan.
"While the President’s budget keeps rates low in the near term, we’re disappointed that it risks sky-high interest rates in the long term," their statement read. "The structure of the proposal switches student loan interest rates from a fixed rate to a rate that varies with the market, allowing students to take advantage of temporarily low rates, but offering no protection for students when rates inevitably begin to climb. Without a cap, this proposal falls far short of the comprehensive reform to student loans that we need."
Campus Progress, the United States Student Association and The Institute for College Access & Success (TICAS) expressed similar concerns.
Depending on the type of loan students took out, their interest rate would fall to between 2.74 and 5.74 percent under Obama's plan, lower than the current rates settled between 3.4 and 7.9 percent. But as The Atlantic points out, rates could still climb to between 8 and 12 percent, putting federal loans on par with private student loan rates, which makes the plan unpopular with a number of interest groups.
Campus Progress, TICAS, U.S. PIRG and Young Invincibles say they support the two-year extension of current rates sponsored by Sens. Tom Harkin (D-Iowa) and Jack Reed (D-R.I.), which would be paid for by closing tax loopholes, even though the plan essentially kicks the can down the road.
Peter McPherson, president of the Association of Public and Land-grant Universities and former deputy secretary of the U.S. Treasury, said he doesn't believe there is an "absolute best answer" to the interest rate debate. McPherson noted the lower the cap on rates, the higher the cost for the federal government.
"I mean everybody would love to have it fixed, have it at a very low interest rate, have it with a very low cap," McPherson told The Huffington Post, "but those don't all work."
Student advocates aren't completely opposed to moving toward a market-based interest rate system though, so long as certain conditions are met.
"A variable rate or a market-based proposal is a step in the right direction," Anne Johnson, director of Campus Progress, told The Huffington Post. But there have to be protections for borrowers, Johnson said. "We think that comes in the form of a cap."
Johnson also told HuffPost this heavy focus on interest rates misses the mark.
"The system of financing higher education in the United States is broken. ... I think we need to have a fundamental shift in the conversation," Johnson said. "We need to have a talk about how we are financing higher education through debt. Interest rates matter, it's very important we keep interest rates low for students, but it's not the only conversation we need to have."
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