Congress to start over on student loan crisis

A tentative agreement tying the Stafford loan rate to the 10-year Treasury note failed after Congress assessed its $22 billion price tag.
July 11, 2013

After weeks of debate, Congress still can’t agree on how to tackle student loans.

A bipartisan plan to lower the recently doubled interest rate on subsidized Stafford loans was found to be too costly last week, and no further compromise has been discussed, leading some students to feel ignored by Congress.

“We say things, but no one listens to us,” said Jiayi Liu, University of Minnesota  philosophy senior. “They don’t know what it’s like to be in debt … they just know a number.”

The interest rate doubled  to 6.8 percent on July 1, and students around the country and at the University have voiced concerns about affording school.

But if students want to be heard, political science professor Larry Jacobs  said they need to be more consistent in their lobbying.

“Whether it’s fair or not, [students] are just seen as not a group you have to worry about come election time,” he said. “They need to be more than just a passing presence.”

Last week, lawmakers were considering a deal that would’ve tied the interest rates on new student loans to the government’s cost of borrowing, plus an additional percentage to account for administrative costs, according to a Senate aide with knowledge of the negotiations.

But with an interest rate cap of 8.25 percent for future years, the plan would cost $22 billion , according to an analysis from the Congressional Budget Office.

Subsidized Stafford loans are the most common federal student loans, and more than 14,300  University students took them out in 2012 — collectively worth about $54.7 million.

Sociology senior Nicole Beane  attends the University part-time, partially because she doesn’t want to take out more student loans.

She said students need to organize better to get Congress’ attention but don’t always know how to be heard.

“It’s hard to navigate Congress and all its relations,” she said.

Biochemistry sophomore Tim Isdahl  said he wants lawmakers to compromise on a policy that makes education more affordable.

“It didn’t seem like [Congress] really paid attention to us,” he said.

Students aren’t alone in their frustration with lawmakers — a Gallup  poll last month found Congress had a 17 percent approval rating.

Caught in a partisan battle

Student loans are an example of a growing divide among lawmakers over the size of government, Jacobs said, particularly regarding how to subsidize things like education.

“What led to the lack of compromise is this fundamental war between the parties, and students are kind of caught in the middle,” he said.

If Congress doesn’t act, the Senate’s Joint Economic Committee predicts   this fall the new 6.8 percent interest rate could cost an extra $2,600 overall for the average student taking out Stafford Loans.

In 2012, the average University of Minnesota student graduated with more than $27,000  in debt, according to One Stop Student Services.

Many different proposals floated around Congress in recent weeks, but none of them passed.

A Democrat-backed bill to bring the rates back down to 3.4 percent, the level for the past two years, failed  on July 10 in a close vote that fell mostly along party lines.

Last week’s failed plan was similar to both a previous White House-backed plan and a Republican bill, which passed the House in late June but didn’t get Senate approval.

“There’s a fundamental divide in Washington that’s as sharp as it’s been in decades,” Jacobs said.

The University has expressed support for a market-based plan on student interest rates.

University Student Finance Director Kris Wright  said in an email that she supported Congress’ attempt to put a long-term solution into place.

But it’s now unclear what will be done to address the new, higher interest rates. Rates were also set to double last year, but Congress passed  a one-year extension of the 3.4 percent rate before the deadline.

Pharmacology graduate student Chris Gallardo  said it’s “ridiculous” to increase interest rates on student loans.

Gallardo completed his undergraduate studies at Chicago’s DePaul University  and said his expenses increased even during the economic recession.

“Education in general,” he said, “seems more out of reach for people.”

 

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