Representative Peter DeFazio (D-OR) slammed Congressional Republicans for voting to hike interest rates to as much as 8.5% for students receiving Stafford student loans. DeFazio voted against this bait-and-switch and instead supports legislation that would slash interest rates for students trying to achieve a higher education.
"This bill was a wolf in sheep's clothing. The Republican's so-called "smart solution' would stick over 125,000 Oregon students who rely on Stafford student loans with up to an additional $6,000 in interest payments," said DeFazio. "The Republicans may pretend that this bill would help students, but it will only saddle the next generation of doctors, engineers, and teachers with more debt. I vehemently opposed this attack on students."
The Republican legislation, called the "Smarter Solutions for Students Act", allows adjustable rate student loans- which are as risky as adjustable rate home loans. According to the non-partisan Congressional Research Service, allowing adjustable interest rate loans would double the amount students pay in interest on their student loans.
Under the Republican bill passed today, students who borrow the maximum amount of subsidized Stafford loans over five years would pay $10,109 in interest payments, compared to $4,174 if interest rates stay at the current 3.4% level. Under this legislation, interest rates would be allowed to skyrocket to as high as 8.5% some years.
Instead, DeFazio is a co-sponsor of Senator Elizabeth Warren's (D-MA) Bank on Students Loan Fairness Act.
"When the big Wall Street banks responsible for tanking the economy need a loan, they go to the Federal Reserve "discount window' to get a sweetheart deal- a taxpayer-funded government loan at a 0.75% interest rate. Students should get the same deal as Wall Street banks. This bill would lower interest rates for Stafford student loans to the same 0.75% interest rate that the Federal Reserve currently gives to the big Wall Street banks. If it's good enough for the banks that nearly destroyed our economy, it should be good enough for the generation that will rebuild it," DeFazio said.
BACKGROUND
For two years, the House Republican leadership has refused to prevent the doubling of interest rates for Stafford student loans. Earlier this year, they passed Paul Ryan's budget that would permanently lock in student loan interest rates at the doubled 6.8% rate. It would also cut Pell Grants for an estimated 400,000 low income students.
According to the Oregon University System, college tuition at Oregon's four year institutions has increased by nearly 50% over the last 10 years. Cost of college tuition has increased five-fold since 1985 and for the first time ever student loan debt tops credit card debt, exceeding $1 trillion. Over 66% of students today rely on federal financial aid to go to school.