|Washington Burns. Student Rates Double. Congress Goes Home.
(July 1, 2013)
Today, July 1, 2013, interest rates for new federal student loans doubled from 3.4% to 6.8%. This resulted from Congress’ failure to strike an agreement to keep interest rates low — a growing concern in the face of historic levels of educational debt and its residual impacts on the economy. Upon its return from the July 4th recess, the Senate is expected to consider two competing bills that, if enacted, would retroactively lower the interest rates. However, the bills propose to do so in far different ways. The first bill — the Bipartisan Student Loan Certainty Act, which is sponsored by Senator Joe Manchin (D-WV), along with Senators Lamar Alexander (R-TN), Kelly Ayotte (R-NH), Richard Burr (R-NC), Thomas Carper (D-DE), Tom Coburn (R-OK), Johnny Isakson (R-GA), and Angus King (I-ME) — would tie the student loan interest rates to the most recent U.S. Treasury 10-year borrowing rate plus 1.85% (to offset costs associated with delinquencies, defaults, etc.). Critics argue that, despite the fact that the interest rate would be stable for the life of a loan, the loan rate itself would vary from year to year as it is tied to the market with no cap. (Note, however, that the bill does include a cap of 8.25% on consolidated loans.) Meanwhile, Senators Jack Reed (D-RI), Kay Hagan (D-NC), Tom Harkin (D-IA), Al Franken (D-MN), and Elizabeth Warren (D-MA) have introduced the “Keep Student Loans Affordable Act,” which simply maintains the current rate of 3.4% for another year. Sponsors argue that this would allow Congress time to come up with a long-term, sustainable approach to student lending. The bill would pay for this yearlong extension by limiting the loopholes that allow those who inherit certain IRAs and 401(k)s to avoid paying taxes on these accounts. Critics of this bill argue that this only “kicks the can down the road” in the same way Congress did last year when faced with this same dilemma. COE has joined a group of 50 organizations in support of the “Keep Student Loans Affordable Act” in hopes that Congress can, indeed, achieve an equitable solution while also allowing lower interest rates for students who need it most.
Despite the strong focus on student loan issues, we as a TRIO community must not be distracted from carrying our own message forward. Media outlets continue to report that “[t]he partisan divide over sequestration has only grown deeper” and that we should all “[s]trap in for sequestration’s long, slow burn.” This apathy is due in large part to the lack of understanding on sequestration’s very real impact on everyday Americans. With respect to the TRIO programs, we MUST make legislators aware of the specific cuts that programs are forced to make as a direct result of the 5.23% sequestration cut. Therefore, during this July 4th recess and continuing throughout the summer, please use the Summer Recess Packet (.pdf) created by COE, which includes the most up-to-date talking points, tips for local congressional meetings and social media outreach, as well as an updated Sample Sequestration Letter (.pdf). Please utilize all of these resources as well as the Government Relations team at COE. Our goal is for the TRIO community to host at least 100 local visits between now and September 1. By doing so, we are helping to ensure that legislators across the country know what is at stake and take targeted action to preserve our students and programs. If you have any questions or concerns, please do not hesitate to contact Heather Valentine (firstname.lastname@example.org) or Kimberly Jones (email@example.com) by e-mail or phone at (202) 347-7430.