BY MICHAEL RICONDA
New City – U.S. Rep. Nita Lowey (D – Rockland) recently announced a push to stabilize student loan interest rates in the face of a looming July 1 rate increase during a teleconference and press inquiry on May 20. Lowey made the case that Congressional inaction on a rate hike will drastically increase student costs for subsidized loans. Unless action is taken, interest rates for these loans are set to double from 3.4 to 6.8 percent.
“These critical loans have helped keep an affordable college education within reach for students of middle class families,” Lowey said. “Right now, 20,282 in New York’s 17th District have subsidized Stafford Loans. Unless Congress acts, the interest rates on these loans will double. This would be bad for students, bad for their families, and bad for the economy.”
Lowey also chastised the federal government for recent sequestration cuts, which slashed spending for education opportunity grants and federal work study.
Student loan rates have skyrocketed in recent years. At over a trillion dollars, student loans have surpassed credit spending as the major item of debt for Americans. The problem has been compounded by a job market which has not accommodated the influx of graduates, leaving many unemployed or underemployed with significant debt.
In response, Lowey announced her introduction of two bills, one of which retains the current 3.4 interest rate while the other allows students to receive loans with interest rates as low as 0.75 percent, matching interest rates banks receive from the Federal Reserve.
A similar bill was introduced last week by fellow Representative Karen Bass (D – Calif.), who proposed a permanent 3.4 percent cap on interest rates.
Echoing Lowey’s position were guests Sister Mary E. O’Brien, president of Dominican College, and Stephen J. Friedman, president of Pace University. O’Brien explained about 74 percent of Dominican’s student population was assisted by federal loans and that a doubling of interest rates would damage both educational institutions and education prospects for individual students.
“The average is about 11,000 per student,” O’Brien argued. “As you can see, it’s extremely important to a college like ours.”
Friedman reported that employers frequently complain about a lack of well-educated Americans to fill positions and respond by lobbying for more visas for foreign workers, making the argument that loan rate increases would further damage the job market by reducing American students’ viability in global marketplaces.
“Under those circumstances, doubling interest rates on these loans is just bad policy,” Friedman iterated. “It makes no sense at all, it is not in the national interest, and it is certainly not in the interest of young Americans.”
Recent attention to student loans has focused not only on high interest rates, but also astronomical tuition costs, which Friedman contested by arguing colleges have instead been raising other expenses, but have also increased financial aid even faster.
Concerns about student loans have grown since last year, when outcry was stronger over proposed rate hikes and contributed to a one-year postponement of a planned increase. This year, it seems more likely that rates will go up to match pre-2007 subsidized loan rates, impacting students taking on new loans, but not non-subsidized, pre-July 1 or commercial borrowers.
Though President Obama is expected to release a budget proposal in the coming weeks, it is unknown if it will address the loan question. Neither party’s budget plan sets aside the $6 billion required to retain the current rate.