January 22nd, 2016
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As the cost of college outstrips the ability of families to pay, too many students are forced to take on high loan debt burdens. Rep. Eshoo believes every student deserves the opportunity for an affordable education, allowing them to compete in the competitive job market and fulfill their potential.
Student Loan Interest Rates
Student loan affordability is critical to college affordability, as well as access to higher education. In 2007, Congress lowered the interest rate for federally-subsidized Stafford Loans from 6.8 percent to 3.4percent. Subsidized Stafford loans are need-based, and are especially important to ensuring the affordability of higher education for all Americans. On July 1, 2013, Congress allowed the 3.4 percent rate to expire, effectively doubling it to 6.8 percent.
Rep. Eshoo has cosponsored legislation, the Student Loan Relief Act, which would extend the 3.4 percent rate through July 1, 2015. Despite having more than 170 cosponsors, House Republican leadership refused to consider the Student Loan Relief Act on the floor of the House. For this reason, Rep. Eshoo led her colleagues in signing a discharge petition to force a simple up-or-down vote once signed by a majority of House members.
House leadership also recently brought a bill to the floor, H.R. 1911, that would tie student loan interest rates to ten-year treasury bond interest rates. This will gradually make college more expensive, not less, and on May 23, 2013, Rep. Eshoo voted against the bill. Despite her opposition, it passed by a vote of 221 to 198.
On July 31, 2013, Rep. Eshoo voted for legislation, the Bipartisan Student Loan Certainty Act, that sets a new formula for federal student loan interest rates. This legislation provided immediate relief to students and their families, and will save students approximately $25 billion between 2013 and 2018.
Under the Bipartisan Student Loan Certainty Act, student loan interest rates are “tied” to the yield of ten-year treasury notes, plus a predetermined percentage. These notes are periodically auctioned off by the U.S. Treasury, and their yield rates are widely seen as a stable indicator of the nation’s economic health. This market-based solution received wide support from Democrats and Republicans alike, and it will save students an average of $1500 over the course of their loans.
Now that the Bipartisan Student Loan Certainty Act has been signed into law, graduate students will borrow at a rate equal to the ten-year treasury yield plus 3.6 percent, with a maximum “cap” of 9.5 percent. Undergraduate students will borrow at a rate equal to the ten-year treasury yield plus 2.05 percent, with a maximum of 8.25 percent. PLUS loans—which are available to the parents of dependent students—will be borrowed at a rate of the ten-year treasury yield plus 4.6 percent, with a maximum of 10.5 percent.
Private Banks Should Not Profit from Federally Subsidized Student Loans
When the healthcare reform package was signed into law on March 30, 2010, it contained the Student Aid and Fiscal Responsibility Act (SAFRA). Under SAFRA, federally-subsidized student loans will no longer be channeled through private banks. This legislation converted all new federal student loans, beginning July, 2010, to the cost-efficient Direct Loan program which is not affected by changes in the financial markets. The bill also provided $10 billion to encourage expanded educational opportunities for community colleges, workforce programs, online training, and adult education, and $2.55 billion for historically black colleges and universities. Shifting to direct federal lending will save more than $80 billion over 10 years and return $10 billion to the Treasury.
In addition to making a college education more affordable, the legislation provided $8 billion to ensure the next generation of students entering kindergarten will have the skills they need to succeed in school. It created the Early Learning Challenge Fund which increases high-quality early learning opportunities for low-income children. SAFRA will also help provide every child with world-class learning facilities by investing in school modernization, renovation, and repair projects that will create healthier, safer, and more energy-efficient environments.
The economic downturn has required more people to learn new, marketable skills in order to be competitive in the workforce. Much of the training and education for new skills comes from our nation’s network of community colleges. Unfortunately, just when their resources and availability have become more important than ever, many community colleges are struggling financially. Unlike private colleges and universities and larger public schools, community colleges rely almost exclusively on state funding at a time when state tax revenues are falling and budgets have been slashed. Without financial assistance to hire and retain faculty and staff and maintain facilities, community colleges are unable to fulfill their critical educational mission.
Rep. Eshoo supports continued investment in our nation’s community colleges and believes they are critical to our nation’s future economic prosperity.
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