Letter to the Senate on Student Loan Interest Rates
June 05, 2013
On behalf of the more than three million members of the National Education Association, and in advance of tomorrow’s expected votes on student loans, we urge you to:
- Vote YES on S. 953 by Senators Reed (D-RI), Harkin (D-IA) and Reid (D-NV), the Student Loan Affordability Act, which would extend the current 3.4 fixed interest rate on student loans for two years.
- Vote NO on S. 1003 by Senators Coburn (R-OK), Burr (R-NC) and Alexander (R-TN), which would amend the Higher Education Act to institute a variable, uncapped interest rate on student loans tied to the interest rate on 10-year Treasury notes plus 3 percent.
Votes associated with these bills may be included in the NEA Legislative Report Card on the 113th Congress.
S. 953 would freeze the interest rate on federally subsidized student loans at the current rate of 3.4 percent for the next two years, protecting the nearly 7 million students who need to borrow money to afford college. The freeze would give Congress time to take a reasonable, measured look at the parabolic rise in student debt while ensuring that college is affordable and working towards reauthorization of the Higher Education Act.
In contrast, changing from a fixed to a variable interest rate—a rate that is NOT capped under S. 1003—would almost certainly increase borrowing costs over the life of the loan, burdening students with crushing debt just as they enter the workforce. Based on Congressional Budget Office (CBO) estimates, students would be locked into rates above 8 percent by 2018. The additional revenue from higher rates on student loans would be used to reduce the deficit by $16 billion. Instead of protecting students from overcharges and unmanageable debt, the federal government would be balancing the budget on their backs. Low-income students struggling to pay the substantial costs of post-secondary education would be saddled with the greatest costs.
Making post-secondary education affordable for students and families is essential for the future of our nation:
- Some 60 percent of students must borrow to attend college—increasing borrowing costs will make it impossible for some to pursue higher education.
- Adding to the student loan debt burden will not only harm students, it will adversely affect America’s economy—those who face crushing debt cannot buy homes or cars, start businesses, support families, or invest, invent, innovate or otherwise contribute to economic growth.
- Total student debt passed the $1 trillion mark last year—already, 35 percent of our nation’s 37 million students are behind on their loan payments, a number that will only grow if interest rates and the cost of borrowing rise.
Again, NEA urges you to vote NO on S. 1003 and YES on S. 953, thereby extending the fixed 3.4 percent interest rate on student loans for two years and providing time to address the full range of issues associated with student financial aid in conjunction with the long overdue reauthorization of the Higher Education Act.
Educators believe all students who wish to do so should be able to pursue higher education and their dreams, regardless of ability to pay. Today’s students are tomorrow’s educators, doctors, nurses, engineers, and scientists—the next generation of innovators who will drive our country and our economy forward. We owe it to them and to ourselves to give them a shot at fulfilling their dreams.
Director, Government Relations