In a potential replay of last year’s stand-off, more than 7 million college students could again be threatened with a doubling of the interest rate on their school loans July 1 if Congress fails to act.
Heading off the increase was one focus of a House Education and the Workforce Committee hearing this week, with the panel’s top Republican saying lawmakers should move to strengthen the federal student loan program more generally.
“Congress has the responsibility to explore ways to strengthen and streamline federal student aid programs making the process simpler for students, institutions and families,” said committee Chairman John Kline, Minnesota Republican.
President Obama and congressional Republicans clashed repeatedly in 2012 over the loan rate, agreeing at the last minute on a one-year deal to keep federal Stafford student loan rates from rising from the current 3.4 percent to 6.8 percent — an estimated $1,000 over the life of the loan for student borrowers. That deal expires in July, and members of both parties said they were determined not to have a replay of last year’s brinkmanship.
“With the job market still recovering, we should not be asking these students to be burdened by higher loan cost.” said California Rep. George Miller, the ranking Democrat on the House panel that considered the issue Wednesday.
Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, said Congress should allow the program to give flexibility to institutions on borrowing standards and practices.
He also pushed for a comprehensive overhaul of student loan programs, warning that piecemeal solutions often create new problems.
“This is the second year in a row policymakers have been left scrambling to keep interest rates down for subsidized Stafford loan borrowers,” he noted, at a cost to the government of $6 billion while reducing eligibility for some subsidized Stafford loans.
“As has become accepted business practice,” he said, “we made another piecemeal patch that took funding away from some students to provide it to others, except in this instance we provided one benefit and took away another from the same students. In effect, we robbed Peter to pay Peter.”
According the Pew Research Center, student loan debt eats up 24 percent of household incomes for the lowest-income families.
“The nation needs a comprehensive plan that involves access, completion and affordability for these and other students,” Charmaine Mercer, vice president of policy for the Alliance for Excellent Education, told the committee that the entire system of federal student loans should be examined.
“The complexities of the federal student aid system require that it be examined in its entirety,” she said. “Addressing any one aspect of this system is necessary, but individually, each is not sufficient for true reform of postsecondary aid programs and promoting student success and completion.”