By Rep Karen Bass
Today is Student Debt Day and young borrowers from around the nation will be on Capitol Hill urging Congress to act before interest rates increase on federal Stafford Loans. In less than one month, rates are set to double from 3.4 percent to 6.8 percent if Congress doesn't put politics aside and end the current culture of trumped up controversies so that we can address this crisis.
Allowing rates to double would be another self-inflicted wound to the national economy and it couldn't come at a worse time. Housing prices are rising again and consumer confidence has hit the highest levels seen in five years. The stock market is rallying and gas prices are falling.
Our economy is beginning to show glimmers of hope, but much like with the sequester, Congress runs the risk of allowing student loan interest rates to become the latest example of Washington not putting the middle class first. Higher rates would be another blow to the many young borrowers who have completed their educations and are looking for work or for those still putting their lives back together following the worst recession since the Great Depression.
The Consumer Financial Protection Bureau has found that excessive student debt hurts the ability of borrowers to buy a home or start a business and deters them from entering professions like teaching and medicine. Student debt has now exceeded the $1 trillion mark, surpassing credit card and automobile debt for most borrowers.
Instead of addressing core issues around the government earning big profits off the backs of borrowers or guaranteeing that students don't pay potentially 10 times as much interest on loans than big banks, the House has passed a GOP proposal which actually makes college more expensive for borrowers. Interest rates in the Republican proposal are variable across the life of the loan, meaning that the interest rate a borrower receives when they take out the loan is likely to be very different than the rate they will have to pay after they have graduated.
Furthermore, their proposal only caps interest rates for subsidized and unsubsidized Stafford loans at 8.5 percent and 10.5 percent respectively, much higher than the current rate of 3.4 percent and more than the 6.8 percent that rates would double to if Congress didn't act at all.
Adding insult to injury, the GOP budget also devastates the Pell Grant program by eliminating $98 billion in funding for the neediest students.
When interest rates across the board are at historic lows and unemployment remains high for recent college graduates, it makes no sense to undermine the signs of life our economy has begun to show by taking such an irresponsible approach. This is the height of hypocrisy from a party that prides itself on rhetoric about not passing debt onto the backs of future generations. Their proposal would add $4 billion to the backs of young borrowers over the next 10 years.
Borrowers know there is a better way to address this issue if Congress can put politics aside and summon the courage to act in the best interest of future generations. We can pay down the nation's debt without breaking the backs of young people just getting started in life.
Congress should reinvest the billions of dollars the government earns from student loan debt back into the system and keep interest rates low for borrowers. Talk to any borrower out there and they will tell you they aren't looking for a bailout -- they are looking for a reasonable and responsible approach to college affordability that allows them to pay back their debts and invest in the future of their families and country.
They have every right to demand a better deal than the Republican proposal. A majority of new jobs in the next decade will require a college degree, making it an economic necessity for future workers to be able to obtain a higher education.
President Obama said it best: "Higher education cannot be a privilege for the privileged few, but an economic necessity that every family can afford." We can make that a reality starting with a fair plan to extend the current cap on interest rates for the next two years, providing Congress with the time to craft a long-term thoughtful approach to college affordability through reauthorization of the Higher Education Act.