The new Democratic majority in Congress – making good on a compact to lower student loan debt by slashing interest rates in half – has unveiled a slimmer version of last year’s debt reduction plan that falls short of some expectations, but also championed the onset of legislative support for issues of college affordability.
The current plan includes reductions only for federally subsidized undergraduate student loans, such as Stafford loans, and gradual implementation, both exceptions made to control costs that got a similar proposal, costing $18 million, rejected last year.
Under this year’s plan, interest rates on those loans would be reduced from 6.8 to 6.1 percent in 2007, to 5.4 percent in 2008, to 4.8 percent in 2009, to 4.1 percent in 2010 and finally to 3.4 percent in 2011.
Speaker of the House Nancy Pelosi (D-San Francisco) and her contingent, including Rep. George Miller (D-Concord), chairman of the Committee on Education and Labor, are set to vote on the issue by Jan. 17.
Miller, who introduced this proposal as well as its costlier predecessor last year, said the effort will save students millions and help stem costs that are “”putting college out of reach for more and more students.””
The Democrats’ plan, in full effect, would save about $4,400 in interest costs for a borrower with $13,800 in loan debts.
Support from public advocates extolled the proposal’s other money-saving figures: “”The average working- and middle-class borrower saves $4,420 over the life of their Stafford loans”” and “”this year’s average freshman saves $2,280 over the life of their Stafford loans”” were some of the praises from U.S. Public Interest Research Group’s Higher Education Project.
“”Over the past decade we have asked America’s college students to shoulder a heavy burden of debt to pay for college,”” U.S. PIRG Higher Education Advocate Luke Swarthout stated in a press release. “”Cutting interest rates on student loans will help millions of working- and middle-class students and their families by saving them thousands of dollars in student loan payments.””
While the previous Republican-controlled Congress forced “”leaders [to] simply choose to put the interests of banks and lending companies ahead of the interests of students,”” Kiley stated, the seat advantage for Democrats in Congress could mean a new approach to college affordability.
However, some college lobbyists are emphasizing support for higher education issues left out of the Democrats’ latest package.
The interest cuts, for instance, left out Perkins and parental loans, and only apply to undergraduates.
Also, the plan ignored the Pell Grant, the largest need-based grant aid program in the nation, which has been stuck at a maximum payout of $4,050 since 2003-04.
U.S. Student Association President Jenn Pae will back such student interests in the U.S. Department of Education’s Student Loan Negotiated Rulemaking Committee this year, where she will discuss student loan regulations with other officials.
“”Students and families have suffered immensely in order to pursue higher education and we must prioritize students during this negotiated rulemaking for the success of our country,”” Pae stated in a press release.
Although the Democrats have no immediate or concrete plans to address issues beyond the interest-rate reduction, it is “”the first step we plan to take to make college more affordable,”” Miller spokesman Thomas Kiley stated in an e-mail.
