U.S. Rep. Lou Barletta, PA-11, voted to prevent the doubling of federal student loan interest rates this summer, but criticized Washington bureaucrats for politicizing those rates.
On Friday, Rep. Barletta voted for the Interest Rate Reduction Act (H.R. 4628), legislation that provides a one-year extension of the 3.4-percent subsidized Stafford Loan interest rate paid for by rolling back government overspending.
But the reduction is only for one year -- leaving millions of future college students wondering what the interest rate could be after next summer.
"Without federal student loans, millions of young men and women across the country would not be able to afford a college education, potentially putting them at a disadvantage in today's global marketplace. Today's students rely on loans because of the incredibly high cost of college. Young men and women and their families need to know their interest rates are set at a reasonable, stable rate," Rep. Barletta said.
"Five years ago, Washington politicians meddled in the student loan interest rate and artificially lowered it. For five years, Washington politicians knew these interest rates would double on July 1, 2012, yet they failed to act. Once again, they wait until the very last minute to address a problem, and once again, they're only putting a Band-Aid on it with a one-year fix," Rep. Barletta explained. "Washington politicians love to have the federal government take over something, make it worse, then play politics, which leads to more uncertainty. Now, college students and their families are caught in the crossfire."
If Congress doesn't act by June 30, the current rates of 3.4 percent will double. U.S. Public Interest Research Group estimates that would cost the average college student about $1,000 more per year of school. About 7.4 million students -- about one out of every three college students in the country -- would see their costs go up.
The cost of this one-year rate extension is $5.985 billion. This is paid for by repealing the "Prevention and Public Health Fund," a slush fund in President Obama's healthcare law.
"This bill is important, but Congress really needs a long-term solution to fix student loan interest rates and provide more economic certainty for our students," Rep. Barletta added.
In 2007, the Democrat-controlled Congress passed P.L. 110-84, The College Cost Reduction and Access Act, which temporarily scaled down interest rates on new subsidized loans to undergraduate students over four years from 6.8 percent (a fixed rate set by Congress in 2002) to 3.4 percent. During debate, House Republicans criticized this approach, pointing out that the interest rate on these loans would jump back up to 6.8 percent on July 1, 2012.
It should be noted that in 2005 House Republicans proposed H.R. 4241, The Deficit Reduction Act of 2005, which would have maintained the variable interest rate for those loans. However, the final reconciliation bill (P.L. 109-171) did not contain the House provision. Had interest rates remained variable, the current interest rate on student loans would be 2.36 percent.