With six days to act before interest rates double on certain need-based student loans, U.S. Senator Richard Blumenthal (D-Conn.) led college professors and students today in calling for legislative action to cut rates and provide long-term stability for students. Blumenthal has joined U.S. Senator Elizabeth Warren (D-Mass.) in co-sponsoring the Bank on Students Loan Fairness Act that would allow students to take advantage of the same low rates offered to banks through the Federal Reserve discount window, currently at 0.75 percent. Blumenthal has also supported legislation to extend the current rate on subsidized Stafford student loans for a period of two years, allowing time a for review of larger measures to address college affordability.
"Our government is scheduled to make $51 billion in profit on student loans this year. We should not be in the business of profiting off students struggling to earn their education," Blumenthal said.
Student loan debt currently tops $1 trillion nationwide, outpacing credit card debt and auto loan debt, hindering home ownership, retirement savings, basic household spending and career choices for millions of graduates. On July 1, rates on subsidized Stafford loans are set to double, from 3.4 percent to 6.8 percent. For the graduating class of 2011, 62 percent of Connecticut college graduates borrowed to pay tuition. Of those students, their average debt at graduation was $29,380.
"College students should be charged no more than the big banks that borrow every day from the Federal Reserve. Students are now charged 3.4 percent--which will rise automatically to 6.8 percent in July unless Congress acts to maintain the present rate, as I have advocated as a stop gap measure. With our wealthiest financial institutions paying less than one percent interest, why should students be charged even 3.4 percent? If we can afford to give massive, cheap loans to wealthy financial institutions, surely we can extend the same rates to the millions of students who will be our next generation of business owners, researchers, teachers, public servants and leaders. In fact, we cannot afford not to do this. Our students' financial futures are simply too big to fail--both for their dreams and the health of our economy," Blumenthal said. "Outside of mortgages, student loans are the largest form of consumer debt, hampering our economic recovery and the choices of millions of families nationwide. I am proud to join Senator Warren in co-sponsoring this fair and reasonable proposal. I have also supported legislation that would extend the current rate for two years to give time for a broader look at college affordability--a crisis that merits immediate scrutiny and action. Further, our nation must devise a way for students with existing debt to work it off or have it forgiven more quickly."
Fairfield University Professor Irene Mulvey, President of the Connecticut State Conference of the American Association of University Professors joined Blumenthal Monday in urging action. She stated: "The amount of debt that students and their families are being forced to carry has grown dramatically due, in part, to reduced funding for public higher education. As faculty members, we see the very real impact that student debt loan has on our students and their families every day. It would be simply indefensible if interest rates for student borrowers were to double on July 1 due to inaction by Congress. We appreciate Senator Blumenthal's strong support for making higher education accessible and affordable. We applaud especially Senator Blumenthal's support for legislation that would ease the debt burden on our students and their families. Extending the existing rates for two years would allow for the larger necessary review of college affordability and student debt. The Warren bill, co-sponsored by Senator Blumenthal, giving student borrowers the same low interest rate as banks is not only a basic statement of fairness, but it acknowledges the risk the increasing student debt loan poses to our fragile economic recovery."