There has been some recent clamoring in Washington to save Americans drowning in student-loan debt, but where those efforts will go is hard to say.
U.S. Rep. Hansen Clark (D-Mich.) introduced the Student Loan Forgiveness Act of 2012 on Thursday, erasing the balance of federal student loans after a decade. "This provides student-loan borrowers with a second chancefor those who have been struggling financially," he said on the House floor. "By cutting this debt, it frees up their money to invest on their own. That will create new jobs throughout this country."
Under Clark's proposal, if students make payments equal to 10 percent of their discretionary income for 10 years (120 payments), the loan would be forgiven. The bill limits forgiveness of loans up to $45,520 and caps future federal direct loans at 3.4 percent.
Justin Draeger, president of the National Association of Student Financial Aid Administrators isn't optimistic about the bill's future: "We appreciate him raising the issue of student-loan indebtedness, but it's largely a symbolic gesture in this budget environment."
Also on Capitol Hill yesterday, student activists delivered 130,000 letters to congressional offices from college students across the country rallying to stop federal student-loan interest rates from doubling in July. National youth associations, including U.S. PIRG, Rebuild the Dream, and Campus Progress, organized the event to call attention to rates on new federally subsidized Stafford loans scheduled to go up from the current 3.4 percent to 6.8 percent.
"Rising college costs, tight family finances, and uncertain job prospects pack a triple whammy for student borrowers. In this economy, the last thing we should do is double the interest rates on student loans," said Rich Williams, higher education advocate for U.S. PIRG in a written statement.
U.S. Sen. Jack Reed (D-R.I) and U.S. Rep. Joe Courtney (D-Conn.) have authored legislation to prevent the rate hike, which is linked to a deal made in 2006 that cut interests rates over five years but, without congressional action, expires this summer.
In the current budget request before Congress, President Obama has proposed a one-year freeze on student-loan interest rates.
"The administration has signaled it's one of their top priorities," says Draeger. "But given that it's an election year and questions about how to pay for it, I don't see a vehicle to move it forward."
Still, NASFAA will lobby for the cut, and Draeger says he hopes the student action will make a difference. "I hope to see more public support for the interest rates and for a more long-term solution," he says.
Officials from the administration have been on the road in recent weeks pushing a college-affordability agenda, including calls to keep federal student-loan interest rates down.