Urgent Congressional Action is needed to Stop Student Loan Interest Rates from Doubling, Witnesses Tell Education Panel
WASHINGTON – Witnesses told a House Education subcommittee today that urgent congressional action is needed to stop student loan interest rates from doubling. Testimony also emphasized that continued federal investment in financial aid programs is key to enriching individual economic success, building a strong state economy, and developing a competitive workforce.
“Landmark investments in federal higher education programs have improved the lives of low-income and middle income students and workers by creating ladders of educational and economic opportunity,” said Rep. Rubén Hinojosa, the senior Democrat on the Subcommittee on Higher Education and Workforce Training. “To remain globally competitive and prepare a highly trained workforce, America must continue to invest in federal financial aid programs that support student access and success”
Witnesses testified that federal student aid programs can do more to assist students and position future generations for success. One immediate issue Congress needs to address is the impending doubling of interest rates on subsidized Stafford student loans. If Congress doesn’t act, interest rates on need-based student loans will double from 3.4 percent to 6.8 percent on July 1.
“Students are already delaying purchasing homes, starting families and fully contributing to the economy because of the massive amounts of debt they incur in their efforts to get ahead,” said Moriah Miles, Chair of the Minnesota State University Students Association. “Reducing interest rates now and providing affordable loans in the future will greatly benefit our country by allowing these students to contribute more money to the economy.”
Congress extended the 3.4 percent rate last year through the 2012-13 academic year, where it is set to double again to 6.8 percent this summer. For each year Congress does not act, the neediest students will see their costs increase by over $1,000 through repayment. Congress should be helping to keep college affordable, not making it more expensive for student loan borrowers to pay for college. While student loans will be one component of the upcoming Higher Education Act (HEA) reauthorization, students and families cannot wait until 2014. Committee Democrats believe that in the short-term, while the economic recovery remains fragile, we must make sure student loan interest rates do not double on students this summer.
As the committee considers various solutions to the impending interest rate hike, members and witnesses alike pointed out that student loan interests should be kept low next year and continue to be affordable for students into the future. Elaborating after the hearing, Terry Hartle, Senior Vice President at the American Council on Education said, “We have a short-term problem and a long-term issue. While it is critical that we resolve the immediate issue, we can't deal with the short-term problem in a way that precludes us from doing the right thing over the long term, ideally through a thoughtful reauthorization of the Higher Education Act.”
Today’s hearing comes as the committee takes next steps to reauthorizing the Higher Education Act. Created in 1965 to make college accessible to all students through student loans and grants, the law has maintained a focus on increasing access to college, increasing quality in teacher education and supports to institutions to help students attend and complete their course of study. The Higher Education Act is due for reauthorization in 2014.
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