Student loan compromise good example of how Congress should work
By U.S. Sen. Angus King
(I-Maine)
On July 1st, Congress failed America’s students. Because of our inaction, the interest rate on new subsidized Stafford loans jumped from 3.4 percent to 6.8 percent. Compared to current market interest rates, this unfairly subjects our students to
more than $30 billion over the next four years in unnecessary loan payments.
Like so many other deadline-induced Washington crises, this situation was both predictable and avoidable. In 2007, Congress temporarily lowered the rates for one subset of federal student loans, the subsidized Stafford loan. Prior to this reduction, both subsidized and unsubsidized Stafford loans were disbursed with the same interest rate. The reduction was set to expire in 2012, and pressed with an impending deadline in the midst of an election year, Congress put together a last-minute, short-term fix: extend the low rate for subsidized Stafford loans for one additional year to give lawmakers extra time to develop a long-term solution. And here we are, one year later facing the same dilemma.
And so when the Democrats proposed another short-term fix, I opposed it because it was simply a bad plan. First, it would have only lowered interest rates for some students, but not all. Second, it would have cost taxpayers an estimated $4.2 billion, and lastly, it would have only delayed this problem for another year instead of offering a permanent solution which is what Congress promised it would do. We were elected to solve problems, not postpone them.
There is, however, one key difference from last year’s situation: there were several credible, long-term solutions on the table, including one from the White House. Interestingly, these proposals shared much more common ground than many may realize. Given the similarities between the proposals, I believed a compromise was within reach and so I worked towards a solution with several of my colleagues from both sides of the aisle. The bipartisan plan we developed and introduced is fair to the American taxpayers and fair to our students. It not only provides all students with reasonable and predictable rates, but it also gets Congress out of the business of setting rates so students don’t have to worry year-in-and-year-out whether or not Congress will do its job.
Our plan ties student loan interest rates to the 10-year Treasury note for both subsidized and unsubsidized Stafford loans. Undergraduate loans would add 2.05 percent on top of the T-note with an 8.25 percent cap on individual loans. Graduate students would add 3.6 percent with a 9.5 percent cap, and PLUS loans, offered to graduates and the parents of undergraduates, would add 4.6 percent with a 10.5 percent cap.
The work that went into crafting this plan demonstrates that this institution can function — that we can rise above the partisan brinkmanship to follow through on our commitments to the American people. What we are offering is not only a sensible policy that helps students and their parents plan for the costs associated with higher education, but also an opportunity to put an end to the troubling pattern of lurching from one artificial deadline to another without a responsible legislation. This type of good faith, give-and-take compromise is exactly how Congress should work for the country.
