Student Loan Reform Moving Forward

Education savingsCongress finally reached a deal on July 31st, after its inaction led to a sharp rise in student loan rates on July 1, which was then signed into law by President Obama on August 9.  Instead of requiring undergraduate students to pay the doubled rate of 6.8 percent on federal student loans, they will now pay the much lower rate of 3.86 percent. Graduate students will pay for loans at the increased rate of 5.41 percent, while parents of students can also expect to pay more starting this school year, as new interest rates for PLUS loans currently stand at 6.41 percent.

Senator Elizabeth Warren (D-MA), known for her efforts to reform the student loan system, said in a recent Q & A with the Herald News: “We should be investing in students who are working hard to get an education. Instead our students are drowning in debt…instead of helping to ease this burden, the government has been making billions of dollars each year in profit off the backs of our students. This is fundamentally wrong.”

While the newly passed deal lowers interest rates for students, none of the rates are locked in as they are tied to the 10-year treasury note and can freely move with the market. If the economy improves as expected, rates will continue to rise.

When asked about the deal, AFSA president Diann Woodard said, “We do not accept this as a long-term solution because the new law has room for extensive improvement. “We urge Congress to find a better solution to this very temporary fix, one that includes a low, fixed rate to protect students from high interest rate environments.”

Student loan debt in the U.S. topped an astounding one trillion dollars this year alone. The projected increase will have an enormously negative impact in the coming years on more than seven million college students. Considering the enormity of the student debt problem, and the significant number of students and borrowers impacted, it is clear that we need a comprehensive overhaul of federal student loan policy as indicated in a letter to Senator Harry Reid (D-NV) and Senator Mitch McConnell (R-KY) that AFSA signed on to along with 19 other AFL-CIO affiliates in June.  The letter urges Congress to “avoid negotiating a deal for the sake of a deal, rather than truly considering the long-term policy impacts of the various comprehensive plans that are being considered.“

We must invest in our nation’s students and work toward closing the opportunity gap that is induced by the severe burden of high student loan interest rates. Long-term policy must be put into place to ensure that higher education is affordable and accessible to all students.

Make sure your lawmakers are striving for a long-term solution. Visit here to contact your representatives.