The Republican-led U.S. House of Representatives passed a bill on May 23 that would avert a doubling of the student loan interest rate on July 1, now set at 3.4 percent, but would end up creating more debt for student borrowers in the long run.
The vote to pass the bill was along party lines. President Obama has said he will veto the bill. Democrats have another proposal, which the AFT has endorsed.
The morning of the vote, AFT president Randi Weingarten sent a letter to representatives calling the Smarter Solutions for Students Act (H.R. 1911) a "betrayal of our nation's young people."
The bill would switch all federal student loans from a fixed rate to a fully variable interest rate. In the short term, as we are now seeing historically low interest rates, that approach would help the 7.4 million students holding federal subsidized Stafford loans. But because interest rates are forecast to rise in the long term, the cost of the loans would increase as students and parents start paying them back. In fact, the Congressional Budget Office projects that H.R. 1911 would actually increase student debt by $4 billion compared with letting current rates double.
"Under the guise of temporarily low interest rates, H.R. 1911 used indebted students as profit centers for the government," wrote Weingarten. "We should be investing in students, not exploiting them."
On May 15, the AFT called on Congress to pass the Student Loan Affordability Act of 2013, introduced by Sens. Jack Reed (D-R.I.), Tom Harkin (D-Iowa) and Harry Reid (D-Nev.). This measure would extend and fully pay for an additional two years of current interest rates on Stafford loans, until Congress reauthorizes the Higher Education Act, which expires at the end of this year. The Higher Education Act is the legislation that authorizes financial assistance for students.
Addressing college affordability and student debt is a priority of the AFT. "No college graduate should be saddled with crushing and unsustainable debt," says Weingarten. "Congress must continue to act to ensure every student has a fair shot at an affordable, world-class higher education." [Barbara McKenna, AFT press release]
May 24, 2013