U.S. Rep. Rush Holt (NJ-12) today joined current and former New Jersey students for a press teleconference opposing a Republican plan that would allow the interest rates on some federal student loans to jump to as high as 10.5 percent.
"The Republican plan would, in effect, transform the federal government into a Wall Street bank -- raking in billions in profits on the backs of students, who would be charged high and wildly variable interest rates," said Holt, who serves on the U.S. House Subcommittee on Higher Education and Workforce Training. "We should be making it less expensive for students to attend college, not putting roadblocks in their path."
The Republican student loan interest rate legislation, H.R. 1911, passed the House today over Holt's objections.
Because the Republican legislation would allow interest rates to fluctuate depending upon market conditions, students would be unable to predict their interest payments in advance. But the nonpartisan Congressional Research Service estimates that, for a graduate who has about $19,000 in subsidized student loan debt, the Republican plan would increase total interest payments by $4,881, relative to today's low, fixed rates.
"I currently repay nearly $2,000 in loans each month on an original principal balance of $150,000, which is just enough to keep up with interest payments and make a small dent in principal each month," said Sharo Atmeh, 27, a Rutgers University-New Brunswick graduate who grew up in a family in New Jersey's lowest socioeconomic quintile. "As you can imagine, I would love to become a homeowner, but that dream will have to wait until after I repay much of my high amounts of student loan debt. The uncertainty associated with a floating interest rate on education loans may devour an entire month's income for some students and would constrain both personal and professional choices even further."
In 2007, Atmeh attended President Bush's State of the Union address as Rep. Holt's guest to highlight the need to improve college affordability. In 2011, he graduated from Harvard Law School and the Harvard Kennedy School of Government.
"I came from a single-parent home, and my mother barely made thirty thousand dollars a year, so being able to pay for college was not an option," said Anthony Covington, 20, a rising junior at Rutgers University who is studying political science and business. "I felt discouraged in a way because I did everything right: I was very active in high school, president of organizations, a part of the national honor society, and served my community as a volunteer firefighter. It was disheartening to think that, even when you do the right things, you still won't have an opportunity to go to a four-year university."
Covington ultimately managed to afford a Rutgers education through a combination of student loans, Pell grants, and other sources of aid, but he is concerned that an increase in student loan interest rates could limit his future opportunities. "For me, this is a scary idea," he said. "I always had hopes of going to law school, but if interest rates skyrocket, I may not have an opportunity to afford a graduate degree."
"College started out as a thing for the rich," said Gabrielle Wickizer, 16, an East Windsor resident and a sophomore at Hightstown High School who serves on Rep. Holt's student advisory committee. "Now unfortunately it's going back to that, in a time where to get a career you need a college degree. In doubling loan rates, this will make loans harder to pay off, and it makes me question if taking a loan out to go to my choice school is worth it."
"Any increase in interest rates only adds to the long-term loan debt that students have to pay back," said Wil Casaine, director of financial aid at The College of New Jersey. "This additional debt has consequences, not only for the students and their families, but for all of us since it represents a drain on the economy. College graduates, instead of starting their post college lives by buying cars, houses, getting married, having children are in essence held back by this debt and have to delay these life events."