Letter to the Senate on New Student Loan Structure
July 23, 2013
On behalf of the more than three million members of the National Education Association, we wish to express our views on the upcoming votes on S. 1334, which pegs interest rates on federally subsidized student loans to the 10-year Treasury rate with caps to protect against inflation.
We are encouraged that interest rates on student loans would remain relatively low in the 2013-14 and 2014-15 school years. At the same time, we are concerned that they would exceed the current rate of 6.8 percent and could ultimately rise to 8.25 percent for undergraduates, 9.5 percent for graduate students, and 10.5 percent for parents of students. We also strongly believe that reducing the deficit on the backs of students seeking post-secondary opportunities is the wrong direction to take.
We urge you to support and co-sponsor the amendments offered by:
- Senators Patty Murray (D-WA) and Al Franken (D-MN), which would ensure that we do not reduce the deficit on the backs of our students by allocating the surplus savings to Pell grants in FY2015.
- Senators Jack Reed (D-RI) and Elizabeth Warren (D-MA), which would provide greater certainty and lower interest rates for students and middle-class families. At a time when many are struggling, we should ensure that a new student loan rate structure does not leave students and families more vulnerable—even a couple years from now—than they are under current law.
- Senator Bernie Sanders (I-VT), which would sunset this student loan agreement within two years to keep interest rates low over the short-term and provide the time needed to enact a long-term solution.
We are pleased that S. 1334 includes a call for a Government Accountability Office (GAO) study that specifically examines costs associated with the student loan program. Such a study could help inform further discussions of college affordability in conjunction with the long overdue reauthorization of the Higher Education Act.
Making post-secondary education more affordable is essential for our nation’s future:
- 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.
We look forward to continuing the dialogue on making post-secondary education more affordable, especially for students from low- and middle-income households.
Director, Government Relations