In an effort to help make college more affordable for students and middle-class families, U.S. Senator Jack Reed (D-RI) today joined Roger Williams University (RWU) President Donald J. Farish, faculty, and students in calling for action to prevent a student loan rate hike on July 1 and new, long-term solutions to the student debt crisis.
Last year, Senator Reed led the successful effort in Congress to freeze interest rates for need-based federal student loans, preventing them from doubling for a year.
Today, the current fixed interest rate on federal Stafford subsidized loans is 3.4 percent, but that rate will double to 6.8 percent on July 1, 2013 unless Congress takes action. This rate hike could cost some families who rely on need-based financial aid thousands of dollars over the life of their loans, -- including nearly 45,000 students in Rhode Island. However, Congress is not expected to begin consideration of the reauthorization of the Higher Education Act, the primary law governing federal investment in higher education, until after the "doubling' deadline.
"Congress must work together to address the student loan crisis. A college education is an important investment for both individuals and America's global competitiveness. Rhode Island families and students want a better life and the chance to get a higher education is a crucial to them. But the rising tide of student loan debt -- which has now crested above $1 trillion -- is putting a college education out of reach for some and could stagnate the economy. It is in our national interest to keep student loan rates low and make college more affordable," said Senator Reed. "While we work toward a viable long-term solution, it is vitally important Congress stops the interest rate hike on July 1st."
Reed's Student Loan Affordability Act of 2013, which has 11 cosponsors in the U.S. Senate, would lock in lower rates for two years while Congress works on a long-term solution to slow the rapid accumulation of student loan debt.
Senator Reed is also leading efforts on a plan to overhaul the mechanism for setting interest rates on federal student loans to help ensure students can benefit from the lowest interest rate the federal government can offer, while also ensuring taxpayers that the program covers its costs.
"We need to rethink the federal approach to providing student loans. There are sensible, fiscally-responsible steps we can take to make our financial aid system more effective, affordable, and sustainable in the long run," said Reed. "I am working on new legislation that would cap interest rates and base them on actual costs of operating student loan programs."
Research by FICO Labs found that in 2005 the average student loan debt was just over $17,000. In 2012 it rose above $27,250 -- a 58% increase in just seven years.
The ballooning student debt rate is creating a drag on the U.S. economy. As student loan debt has risen, home ownership and car ownership have declined for young households. Keeping the cost of borrowing low will help reduce the amount students owe and help give them purchasing power that can improve our overall economy.
Reed urged students at Roger Williams University -- and at colleges and universities throughout the country -- to take action and urge their lawmakers to address the student debt crisis.
"I hope we can get bipartisan cooperation this year," Reed concluded. "And I am hopeful because of the young people who are here today and the millions of Americans around the country who agree that this is the right thing to do. I urge you to use your voices -- and your social media skills to encourage Congress to act."
Farish, who launched the Affordable Excellence initiative at RWU last fall to confront the most pressing challenges facing higher education in America -- increasing costs that limit access to college, rising student and family debt, and the job readiness of graduates -- stressed the significance of developing solutions to limit debt.
"Collectively, we are denying more and more young people the opportunity for a brighter economic future by forcing them to assume unreasonable levels of debt or by driving them away from higher education entirely," Farish said. "It is antithetical to our commitment to educate our citizenry, it is against America's economic interests, and it is unnecessary."
Calling on more colleges and universities to address rising costs -- as part of Affordable Excellence, Roger Williams has frozen tuition for students entering next fall and guaranteed their tuition will not rise for the next four years -- Farish noted that schools should focus less on maintaining rankings and more on the interests of their students and families.
"America has stated very clearly that it requires higher education to be both better and more affordable," Farish said. "At Roger Williams, we are doing our part by controlling costs, limiting debt and ensuring that our graduates have the skills needed for life after college -- with Senator Reed's leadership, our hope is that Congress can do their part in creating long-term solutions to student debt."