The countdown begins, but does it matter?
Low-interest federal loan rates for college students are likely to double on Monday, July 1st, adding a financial burden of $4.3 billion on the shoulders of nearly 7 million young Americans, and their parents.
Congress broke for a July 4th recess yesterday despite the looming deadline that will hike certain Stafford loan interest rates from 3.4% to 6.8%.
Still, senators are insisting that the rate hike is reversible and will be changed soon after congress is back in session.
Sen. Bernie Sanders (Independent-Vt.) believes that there will be a conclusive vote in the Democrat-controlled Senate as soon as lawmakers return from their holiday recess. “My hope is that within a week or 10-days we will pass legislation in the Senate, keeping the 3.4% rate,” he tells The Daily Ticker.
A bipartisan plan led by Sen. Joe Manchin (D-W. Va.) and co-sponsored by three Republican senators gained traction this week, the plan would base interest rates off of the 10-year Treasury note plus an added percentage. Gridlock and debate combined with congressional focus on passing measures like immigration reform prevented the Manchin plan from being passed. An alternate bill sponsored by Sen. Harry Reid (R-Nv.) proposing an emergency 1-year extension of the current 3.4% interest rate also went largely ignored.
“We have a horrendous crisis now in terms of the debt that students and their families are incurring,” says Sen. Sanders. “We as a nation have to make a determination: do we really want to be competitive in the global economy? Do we want a well-educated workforce? Do we want to end the absurdity where hundreds of thousands of young people don’t go to college anymore? If you raise interest rates on student loans it’s only going to be more prohibitive.”
On May 23rd, the House of Representatives addressed the rate hike and passed a bill sponsored by Rep. Kline (R-Mn.). The bill would also tie interest rates to the 10-year Treasury but add a higher premium to them. The plan squeaked by on party lines (221-198) but the White House has threatened to veto stating, “[Kline’s] bill's changes would impose the largest interest rate increases on low- and middle-income students and families who struggle most to afford a college education.”
On June 12th Rep. Kline chided the senate on their inability to pass any measure that would stop the loan hike, telling The Daily Ticker: “We’re in an interesting position. The House of Representatives has passed legislation that will fix this thing permanently and the Senate as is so often the case is wringing its hands.”
Student debt in the U.S. stands at a record high of $1.1 trillion-- it now surpasses both auto and credit card debt. According to a study by Fidelity 70% of the class of 2013 is graduating with about $35,000 in college-related debt.
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