Student Loan Interest Rates
Floor Speech
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Mr. COURTNEY. Mr. Speaker, in 5 days, unless Congress acts, the Stafford student loan program, which helps 7.5 million students pay for college, is set to see its interest rates increase from 3.4 percent to 6.8 percent. Again, this is at a time when student loan debt now exceeds $1 trillion. It's the highest form of consumer debt in the economy. It exceeds credit card debt and car loan debt. And yet, despite the fact that, again, students and families are facing this mounting, crushing burden, unless we move in a very short period of time, we are going to add to that burden by allowing the interest rates to go from 3.4 percent to 6.8 percent.
Six years ago, this Congress acted to pass the College Cost Reduction Act, which cut that rate from 6.8 percent to 3.4 percent. It was a 5-year bill tied to the Higher Education Reauthorization Act. Last year, with minutes to spare, we extended that lower rate for 1 additional year. Again, here we are today, 5 days away from this rate doubling.
I've introduced legislation, H.R. 1595, the Student Loan Protection Act, and 196 Members of the House signed a discharge petition demanding that the Speaker of the House bring this bill up for debate and passage, which will protect that lower rate for an additional 2 years. We need that time so that we can pass a new Higher Education Authorization Act, which will deal with the broad range of issues that surround how we pay for college and access to higher education, which includes the Stafford student loan program, the workhorse for families to pay for college. It deals with Pell Grants and Perkins loans. It also deals with the obstructions and hurdles that people face when they want to refinance student loan debt after they have left college. Again, that's a big part of that $1 trillion debt burden that's out there in society.
We need a broad, long-range plan to pay for higher education because the stakes are huge. We know that the U.S. economy needs critical skills in our workforce if we are going to continue and grow and prosper. The baby boomers are now hitting retirement age at increasing numbers, and in a whole range of critical occupations, from medicine to science to engineering, we need to refill the ranks. And higher education is the avenue that we can continue to succeed as a country and as a nation. Our competitors know this. They are investing in higher education at a much higher rate than we are in the U.S. We must act to make sure that, again, we don't go backwards on July 1.
The House passed a bill on May 23. The Republican majority pushed a bill through which they claim solves the problem. It changes the fixed rate loan program to an adjustable rate tied to 10-year Treasury notes, which is roughly now at about 2.6 percent. It adds an additional 2.5 percent to that. They claimed when they passed that bill that that solves the problem. Unfortunately, the Congressional Budget Office drilled down deeper and analyzed what the real net impact would be on students. The problem with that variable rate program is that for a freshman entering this fall, like my daughter, who doesn't use the Stafford loan program, if some of her fellow students sign up for the Stafford loan program, under the Republican bill they really don't know what the rate is because it will reset over the 4 years that freshman is in college. Looking at where Treasury notes are projected over the next 4 years, the Congressional Budget Office has told us that, in fact, for that graduating student, 4 years from now the interest rate on the loan that they will graduate with will be over 7 percent.
So, in other words, as CBO told us, if we allow the Republican bill to go forward, it's actually worse than doing nothing and allowing the rates to double to 6.8 percent. President Obama has proposed a different version, which would, again, use the cheap cost of money today with an inflation add-on. But that plan that the President put forward locks in the rate for the student who takes that loan out next year. So, in other words, that freshman who signs up for a Stafford student loan that will go to school with my daughter next year, their rate will not reset from one year to the next. They will have at least the protection of a fixed rate based on the calculation using the Treasury note baseline. It is a better proposal. The Republican bill has a cap in terms of how high these rates can go over time. The President's does not.
We need, obviously, to get both sides to come together and come up with a real compromise which comes up with an affordable, sustainable way for the Stafford student loan program to work. With only 5 days to go, I would argue that the better course now is just protect the lower rate, give us some time to come up with, again, overlapping good ideas from both sides of the aisle to fix this problem.
Let's not let the rates double. Let's pass H.R. 1595. Let's help 7.5 million college students pursue their goals and dreams and help the U.S. economy.
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