Making Loans Fair for Students and Taxpayers
Congress must find a long-term solution, not a short-term fix
June 21, 2013
This is the season for high school graduations. More than two million of those graduates are going to college and many of those students will need a loan to help pay for it.
On July 1, rates on 40 percent of new student loans will double from 3.4 percent to 6.8 percent.
Last year, Congress enacted a one-year fix that prevented this increase at a cost of $6 billion to taxpayers. This year, Congress is working on a long-term solution for all new student loans. That would be fairer to students and fairer to taxpayers.
Already the House of Representatives has passed legislation that allows the market to set interest rates, instead of leaving it to Congress to set arbitrary numbers. President Obama supports this idea, too. Under this plan, college students would benefit from today's low interest rates in the same way a car buyer or home buyer does.
The legislation I've introduced with Senators Tom Coburn,R-Okla., Richard Burr,R-N.C., and Johnny Isakson,R-Ga., would set rates at the May auction rate of the 10-year treasury bond, plus 3 percent. This would mean that 100 percent of all new student loans made this year would have a rate below 5 percent. Almost all Senate Republicans voted to support this solution on June 6.
This an obvious path to a permanent solution, but some Senate Democrats still are digging in their heels in support of a short-term political fix that will benefit only 40 percent of new student loans.
If rates increase on July 1, these Senate Democrats will have to explain to student borrowers why this rare bi-partisan agreement in Washington wasn't good enough for them.
Join us for a live debate on student loan rates on Twitter. Tweet using the #studentloans hashtag.