Rally Planned to Fight Higher Interest Rates on College Loans
As the political debate heats up over student-loan interest rates, advocacy groups are organizing to voice concern over college affordability on June 5, which has been declared "Student Debt Day 2013."
A coalition including Campus Progress, Rock the Vote, US PIRG, and Young Invincibles and the American Federation of Teachers are rallying members to leverage Congress to keep interest rates on student loans from doubling July 1, a move that groups maintain will cost the average student borrower an additional $1,000 per loan.
Unless lawmakers act by July 1, interest rates on subsidized Stafford loans, available to those demonstrating financial need, will double from 3.4 percent to 6.8 percent. The same scenario played out last summer, and students were able to persuade Congress to keep rates lowbut just for one year.
Now some policymakers are looking for a long-term solution, but the parties cannot agree on how that looks.
President Obama made it clear in a Rose Garden event Friday, surrounded by college students, that he didn't like the approach that House Republicans have proposed. He urged students to write, email, and Tweet their congressional representatives to express their opinion on the issue.
"The test here is simple. We've got to make sure that federal student loan rates don't double on July 1st. The House of Representatives has already passed a student-loan bill, and I'm glad that they took action. But unfortunately, their bill does not meet that test," said Obama in his remarks Friday. "It fails to lock in low rates for students next year. That's not smart. It eliminates safeguards for lower-income families. That's not fair. It could actually cost a freshman starting school this fall more over the next four years than if we did nothing at all and let the interest rates double on July 1st."
The House bill would tie interest rates on federally subsidized undergraduate student loans to the 10-year U.S. Treasury note, something the Obama administration also proposed in its fiscal year budget. But the House version would allow the rate to fluctuate, and after graduation, students could package their loans together and take the weighted average of the interest rate on their loans. (See Politics K-12.)
The president's plan outlined in a fact sheet on the White House website could result in interest rates even lower than 3.4 percent initially, but rates would vary from year to year and be locked in over the life of every loan. The administration version would not place a cap on how high the rates could go, which some student groups have criticized.
On Friday, Obama did not specifically tout his plan or the Senate Democratic version of a solution.
Many student-advocacy groups have indicated support for the Senate Democrat's proposed Student Loan Affordability Act of 2013, which would extend the low 3.4 interest rate for another year and allow Congress to address a longer-term solution in the next reauthorization of the Higher Education Act in 2015.
"We are hearing a lot of frustration from students that we are having to fight this battle again this year," says Rory O'Sullivan of the Washington-based Young Invincibles. While there is a desire for a long-term solution and tying interest rates to the market is fine, his organization wants a cap included to ensure affordability and predictability for student borrowers. O'Sullivan says none of the proposals meet that criteria. So, the message coming on Wednesday from students to lawmakers is, at a minimum, to keep interest rates low for now, he says.
The issue affects nearly 7 million student borrowers. US PIRG researchers compiled a table of the top 25 college and universities where students borrow using Stafford loans to illustrate the impact rising interest rates could have on students.
Campus Progress reports it will be organizing about 200 young people for a lobby day on Capitol Hill on Wednesday. It issued a statement calling the House approach a "step in the wrong direction." Organizers of Young Invincibles will be joining in efforts June 5 and trying to get 1 million signatures on its online petition to keep interest rates low.