Huffman rallies support for bill to prevent student loan interest rates from doubling - Marin Independent Journal

May 30, 2013

Rep. Jared Huffman visited the College of Marin on Wednesday to rally support for legislation that would prevent a doubling of student loan interest rates on July 1.

Huffman, D-San Rafael, gathered a group that included Marin County educators, nonprofit executives serving the student population, parents, and students at College of Marin to discuss the urgency of the situation.

"We are in an economy that has been globalized; the competition for jobs is greater than it has ever been before," Huffman said.

"At the same time that we have globalized," Huffman continued, "we've seen income inequality grow. So at a time when we most need higher education, we face the prospect of its becoming more and more out of reach if we don't do something to make it more affordable — not just for the Mitt Romneys of the world ... but for everyone."

If Congress fails to act, 7.4 million students with federal Stafford loans will see their subsidized loan rate rise from 3.4 percent to 6.8 percent.

Lance Reyes, a sophomore studying electrical engineering at College of Marin, said, "It's very disconcerting to me that this rate is going to increase substantially." Reyes said he has to borrow about $10,000 a year, primarily due to the high cost of living in Marin. He works three jobs while attending school.

"If I was looking at it now, I would have second thoughts about continuing with school," Reyes said.

In 2011, before Republicans gained control of the House, Democrats set the interest rate on federally subsidized Stafford loans at 3.4 percent. Last year, Republicans bowed to political pressure and extended the 3.4 percent rate through the 2012-13 academic year.

Now, however, Republicans in the House are refusing to renew the rate. Instead, earlier this month they used their majority status to pass legislation that would allow student lending rates to reset each year. The rates would be based on the interest rate of a 10-year Treasury note, plus 2.5 percentage points for Stafford loans. The legislation would trim the federal deficit by $3.7 billion over 10 years.

"How bad is this bill?" Huffman said. "It's so bad that the Congressional Research Service has found that students and families would pay higher interest costs under the Republican bill than if we simply allow the rates to double."

According to the Congressional Research Service, an agency within the Library of Congress, students who borrow the maximum amount of subsidized Stafford loans over five years would pay more than $10,000 in interest payments under the Republican bills, compared with $8,808 if rates are allowed to double to 6.8 percent in July, and $4,174 if rates were kept at 3.4 percent.

But Kevin Krick, chairman of the Marin GOP, said that example assumes that the 10-year Treasury note interest rate won't decline over that period. "It may also go the other direction," Krick said. "In terms of sound fiscal policy most interest rates are tied to some tangible vehicle."

Huffman has signed on as a co-sponsor of an alternative bill, introduced by Joe Courtney, D-Conn., which would freeze current rates at 3.4 percent for the next two years.

Krick said, "That to me sounds like a freeze it and forget type of maneuver."

Huffman is also co-sponsoring two related bills — HR 1527, which would increase the tax deduction for student loan interest, and HR 1738, which would permanently extend the tax credit that covers expenses such as tuition, fees and course materials.

Participants in Wednesday's roundtable discussion shared stories about the rapid rise of education costs, and the pressure it is putting on young people. Total student debt in the U.S. recently surpassed $1.1 trillion.

David Coon, president of College of Marin, said 50 percent of his college's students receive financial aid and 800 receive Stafford loans. He said as student fees rise requests for financial aid increase and college enrollment drops.

"In addition to rationing education across California, we're increasing prices to the point where students can't afford it," Coon said.

Terra Linda High School Principal Lars Christensen said he worries about students who rack up large debts in pursuit of a college education.

"We fix a big weight to their backs that they will carry for a long, long time," Christensen said. "You can't get rid of a six-figure debt obligation even if you enter an occupation that pays fairly well. It is a burden that is unyielding."

San Rafael City Schools Superintendent Michael Watenpaugh said student loan debt is preventing people in poverty from climbing into the middle class.

Watenpaugh said, "They were in poverty; the college degree was supposed to help them get out of poverty; and they find themselves right back there."

 

Source: By Richard Halstead