Congress failed to strike a deal to keep student loan rates low on Monday, meaning that the subsidized Stafford loan interest rates will soar to 6.8 percent despite increasing concerns that the current generation of college students will be saddled with student loans that they might never be able to pay off.
Congressman John Garamendi, who represents much of Yolo County in Congress, fought hard against these changes and said on Monday he was “outraged by the shameful failure of Congress to stop the subsidized Stafford Student Loan interest rate from doubling.”
According to his office, several weeks ago the Congressman signed a discharge petition that would force Speaker John Boehner to allow an up-or-down vote on a two-year extension of the current 3.4 percent interest rate if a majority of members of Congress signed it.
However, that number fell short, as only 196 of 218 required to sign it did so.
Congressman Garamendi is also a co-sponsor of Congressman John Tierney’s Bank on Student Loan Fairness Act, which would reduce the Stafford Student Loan interest rate to a level comparable to the rate the nation’s largest banks receive from the U.S. Treasury.
“It is shameful that my colleagues across the aisle in the House refuse to let us vote on simple legislation that preserves the subsidized Stafford Student Loan rate for two years. It’s also shameful that Republicans in the Senate filibustered this extension, despite it having majority support in the Senate,” said Congressman Garamendi.
He continued, “The federal government will pocket $34 billion from student loans this year. For every dollar we loan to lower-income students, we get a $1.36 back. What more do my Republican colleagues want? Aren’t we taking enough money out of the pockets of people who just want a chance at a better life for themselves or their children? Let there be no mistake: the doubling of the Stafford Student Loan interest rate is just the latest in a series of preventable manufactured crises caused by dysfunctional leadership in the House and an obstinate minority in the Senate. I hope the American people are paying attention.”
At UC Davis, 11,000 students use Stafford Student Loans to help them pay for tuition.
On May 23, House Republicans passed H.R. 1911, the “Making College More Expensive Act,” as critics call it.
“Students and families are finding it more and more difficult to afford a college education and are turning to student loans to make up the difference. Especially during a tight economy, it pays to get a college education. It is in the nation’s long-term economic interest to ensure that qualified students are able to afford and access institutions of higher learning,” the Democratic-led Committee on Education and the Workforce put out.
They argued that H.R. 1911 would make attending college more expensive for students and families by increasing the interest rates for students, costing about $4 billion more in total in additional loan interest charges.
This would saddle students will higher interests rates, which would add “to the crushing debt already carried by college students and their families.”
The release notes, “Under the Republican bill, borrowers today won’t be able to take advantage of the historic low rates. For instance, the very same Federal student loan taken out next year will be reset every year. By the time next year’s freshmen graduate and start repaying their loans in 2017, the interest rate on that loan taken out during their freshman year is projected to more than double beyond today’s current rate for subsidized Stafford loans.”
It adds, “According to estimates provided by CBO, federal student interest rates will be higher than current fixed rates for millions of borrowers seven of the next ten years.”
The Institute for College Access & Success and The Education Trust argue, “While appearing to offer low rates for new borrowers, the bill does not make federal loans more affordable. In fact, it makes them much more costly for students, with variable rates on undergraduate loans that are projected to rise nearly three percentage points(to 7.36%) by the time this fall’s freshmen graduate from college and make their first loan payment.”
“A college education provides a ladder for people to climb up toward their American Dream. However, in just one week, hard working students at UC Davis, Solano Community College, Yuba College, and schools across the country will be kicked down a rung unless Congress acts to prevent Stafford Student Loan Rates from doubling. Forcing students to pay an average of $1,000 more for their education would not only hurt them, it would harm America’s families, businesses, and our economy. For that reason, I have called for legislation freezing the current rate to be brought to the floor. Congress should not adjourn until we stop this senseless rate hike,” said Congressman Garamendi.
According to the Associated Press, the effects are not immediate, only impacting new loan documents which would be signed in the fall, and lawmakers believe they can return the interest rates to 3.4 percent when they return after July 4.
The Republican-led House passed a bill before leaving town that linked student loan interest rates to the financial markets. The Democratic-led Senate, however, was unable to overcome a procedural hurdle.
Experts suggest that neither party is thrilled with the outcome, however, there was little sense of urgency coming from either Congress or the White House here. Part of the inaction may be due to the timeline here.
Since the rate hikes only impact new loans and students will not be taking out new loans for a few more months, Congress may be able to pass retroactive legislation that would lower the rates of loans that will be taken out.
As one observer noted, “So while the optics of doubled rates aren’t great, Congress still has some time to come up with a solution before they actually hit students’ pocketbooks.”
“There has been a bloc of folks saying any reduction of rate has to be contingent on raising the rate further down the road. It hasn’t gotten worse by adopting [that],” said Mike Russo, director of federal programs at U.S. PIRG, a consumer advocacy group. “It is the best thing for students given the timeline…and there is time to fix it.”
—David M. Greenwald reporting
The other side of the story:
[quote]Indeed, the White House has expressed support for a proposal to tie interest rates to financial markets, rather than have the federal government arbitrarily set them. A Republican-led bill to do just that cleared the House earlier this year, but similar proposals have failed to pass in the Senate.
[/quote]
All in all it’s no big deal because after July 4 Congress will act to bring the interest rates back down and make them retroactive to July 1.
Subsidized rates. Hyper-inflated costs. Mounting massive debt. What does that sound like?
Welcome to the new economic bubble.
It will pop and the idiots in Washington will go working on the next one.
If you really want to help students pay for their education, start demanding that colleges deliver a better product at a lower price-point. Technology holds a key. So does the realization that colleges have gorged on the feeding trough of cheap public money for far too long and the resulting bloated salary budgets are unsustainable and require significant cutting.
“All in all it’s no big deal because after July 4 Congress will act to bring the interest rates back down and make them retroactive to July 1. “
It’s only no big deal if they do that. My problem with that theory is that there have been a number of other times this year where lack of cooperation led to suboptimal outcomes. So I no longer have faith to believe it will get done.
Frankly: [i]If you really want to help students pay for their education, start demanding that colleges deliver a better product at a lower price-point. Technology holds a key. So does the realization that colleges have gorged on the feeding trough of cheap public money for far too long and the resulting bloated salary budgets are unsustainable and require significant cutting.[/i]
Or you could also follow your line of thinking in other threads and skip college altogether. There’s already all the MOOCs and information you could possibly want online, at the cost of internet connection and a good computer.
I guess that these students are too “special” to put their butt on the line, serve their country, and earn G.I. Bill Benefits like many of us had to back in the 1960’s. Steve Hayes (Draft Class of 1964!)
probably don’t want to die for the disgraceful liars who lead us in washginton from both parties. hard to blame them.
when we price students out of a college education, i guess the roosters will come home to roost and we will really become a second rate economic power. maybe that doesn’t matter. i find frankly’s position highly ironic though.
The biggest problem is we now have a president who has no clue how to run an economy or create jobs. These kids are graduating with huge debt and no good job opportunities. As examples my daughter has a BS and my son-in-law has a Masters, both graduated 2 years ago, and after exhauastive searches have both had to settle in low paying customer service jobs not linked in any way to their educations.
the bigger problem is that college has become increasingly unaffordable for typical people, increasingly necessary to gain high level employment, and now we are entangling young people with huge amounts of debt that they’ll never hope to pay off.
i find it comical that the a conservative believes the president’s job is to run an economy and create jobs. that’s the private sector’s responsibility. the president has only ability on the margins to do so, and when the two parties cannot cooperate, zero chance.
quote]the bigger problem is that college has become increasingly unaffordable for typical people, increasingly necessary to gain high level employment[/quote]
So even if college was more affordable WHERE ARE THEY GOING TO WORK?
[quote]i find it comical that the a conservative believes the president’s job is to run an economy and create jobs[/quote]
I find it even more comical that liberals don’t realize how much the president’s policies are hurting the job market. All the way from strangling federal regulations, Obama led EPA meddling to the upcoming implimentation of the job killing Obamacare.
those entering college now aren’t going to be working for at least five or six years. the current economy isn’t the problem. the economy will turn around.
i find it commical that you think that obamacare is going to kill jobs, the current system ties health care to jobs, how is that helpful for job growth?
[quote]i find it commical that you think that obamacare is going to kill jobs, the current system ties health care to jobs, how is that helpful for job growth? [/quote]
You need to widen your horizons and quit just watching Rachel Maddow. In the current system an employer doesn’t have to offer healthcare. And if they do they have the option of paying just a percentage of the employee’s healthcare or buying a cheaper plan (for ex. a castrophe plan). Under Obamacare the employer is responsible for paying for the entire plan or opting to pay a fine and not providing a plan at all. So employers that up to now that haven’t provided healthcare are now responsible with either a huge healthcare bill or paying fines both of which will curtail their hiring. If you can’t understand that than you need a course in Econ 101.
Steve Hayes, thank you for your service.[quote]”The U.S. government projects to make more money off student loans this fiscal year ($60-billion in profit) than ExxonMobil, Apple, J.P. Morgan Chase or Fannie Mae made on their respective businesses last year,” USA Today[/quote]Now, if you think that’s an outrage, consider that until the Obama administration changed the system our private banks make gigantic profits from student loans without taking the slightest risk of non-repayment.
The whole student loan program turned out to be jam-packed with unintended (?) consequences–big profits for banks and loan companies, support for uncontrolled jumps in college tuition and textbook prices, decades-long debt for people who’d have been unable to borrow such high amounts based on their credit qualifications, bankruptcy ineligibility, the rise of phony private schools that take the money and leave their “students” half-educated in fields with few employment opportunities.
It’s in our country’s interest to encourage education and training for our citizenry. It’s a mystery how this supposedly benevolent undertaking left everyone associated with it thoroughly enriched except the alleged beneficiaries.
Oh yeah, Steve, remember how little the old GI Bill education benefits were compared to the current level. We’d be better off all around if we brought back the draft. The all-volunteer concept also has brought unintended consequences by the bundle–including decades-long wars that only a relatively few families care about. But, that’s another topic.
My son went into the Army on the GI Bill. It paid for his medical education at Penn State and gave him $1000/month towards his room and board during those four years. His payback is four years serving in Germany making $140,000/year. No college bills and now roaming Europe. What a great deal.
GI: sorry about you kids not finding adequate employment. However, you nailed it. Obama and the Dems have failed drastically to mend the economy and create jobs. At this point it is clear that this is an intended policy of those in left political leadership.
The hypocritical aspect of this is that those same left political leaders protect the education establishment and their path of unsustainable cost explosions.
[quote]i find it commical that you think that obamacare is going to kill jobs, the current system ties health care to jobs, how is that helpful for job growth? [/quote]
The more I read this the more I have to laugh. Are these liberals living in LaLa Land? Obamacare almost completely ties your healthcare to your job with employers either having to supply full healthcare or pay a fine if they don’t.
four years in germany is a little different from four years in afghanistan or iran.
except i get insurance if my job doesn’t currently provide it and keep it if i’m unemployed, right?
[quote]four years in germany is a little different from four years in afghanistan or iran. [/quote]
News alert!!!! I didn’t know we had troops in Iran. When did Obama do that?
meant to say iraq, but the specter of iran will play a role in discouraging kids from joining up as well.
[quote]except i get insurance if my job doesn’t currently provide it and keep it if i’m unemployed, right? [/quote]
You can get insurance now if your job doesn’t provide it. Obamacare doesn’t give you free insurance if your job doesn’t provide it. You still have to pay, how much depends on your income, but folks are finding out that it’s going to be much more expensive than they thought.
[quote]meant to say iraq, but the specter of iran will play a role in discouraging kids from joining up as well. [/quote]
Well, that’s why it called the military. There’s always the chance that you’ll be sent to a war zone. But the fiancial/free education tradeoffs are pretty alluring to a lot of young people. Do you think you should get all the benefits and have a clause that you never have to fight for your country?
I’m on vacation visiting family that have had their hours cut because of Obamacare. They say that their employer might add jobs… But they will be 20 hours a week jobs.
I’m on vacation visiting family that have had their hours cut because of Obamacare. They say that their employer might add jobs… But they will be 20 hours a week jobs.
Here’s an interesting overview on the different loan programs and the politics of this situation: [url]http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/13/everything-you-need-to-know-about-the-student-loan-rate-hike/[/url]
I’m really not sure what Garamendi has to do with this, other than putting out a press release (which was apparently picked up by the Vanguard and The Daily Democrat), and voting against the Republican version. Discharge petitions go nowhere right now, and surely he knows that — so that was just a symbolic gesture.
[quote] family that have had their hours cut because of Obamacare.[/quote]
Interesting, considering that the employer provisions don’t take effect until January 2014.
It does make me wonder how much of this stuff is real and how much is for show.
We now get from politico:
[quote]The Obama administration is postponing for one year the requirement that businesses cover their workers under Obamacare.
The administration said late Tuesday that the move recognized that the reporting requirements – the steps businesses have to take to show they were complying with the rules — were complex and they would try to streamline them over the next year.
Read more: http://www.politico.com/story/2013/07/obamacare-provision-postponed-93677.html#ixzz2XvcrUXDn
[/quote]
Now back to the topic…
[quote]The Obama administration is postponing for one year the requirement that businesses cover their workers under Obamacare.
The administration said late Tuesday that the move recognized that the reporting requirements – the steps businesses have to take to show they were complying with the rules — were complex and they would try to streamline them over the next year.
[/quote]
LOL, they delayed until after the 2014 mid term election because they know what the fallout would have been.
[i]Interesting, considering that the employer provisions don’t take effect until January 2014.[/i]
Don, you must know that most companies cannot change staffing on a dime. They need lead time to get the new schedules and teams situated.
Regardless, I don’t know what your point is anyway… would it change the point if employers wait until 2014?
I think this is a much too common response to the requirement to provide healthcare. Many employers running their business on thin margins are going to cut employee hours to prevent the Obamacare mandates from impacting them. Think about it. Let’s say you have one full-time $10 per hour employee. Now, instead of paying for her health insurance you can cut her hours to 20 and get another half-time $10/hr employee for the same total cost.
Obamacare impacts to jobs are enhanced by Obama’s crappy economic policies that have led to real unemployeement (when considering the number of people that dropped from the workforce and those that have jumped on the disability gravy train.) at 12% for the nation. With a health job market, employees would ditch working for employers not offering fulltime work without health benefits. As it stands today, people are having to take these crappy jobs.
This is going to get very interesting. The Democrats are delaying the employer mandate for one year but have left the individual mandate in place. First of all if this is law how can the democrats come out and say it’s delayed without an act of Congress? Secondly how are indivuals who are going to be forced to buy healthcare or be fined going to feel about businesses being exempt but not them? The Democrats have a huge problem on their hands and the GOP is going to make them pay.
They have an employer mandate for student loans? That is very interesting.
Ummm, look up 4 posts, you posted the Obamacare news didn’t you?
And I posted: “Now back to the topic… ” at the bottom. That was the acknowledgement that we all got off topic at your prodding and we needed to get back on.
So you posted one more Obamacare news then declared it off topic….LOL
You had the first word on the topic. Now you’ve had the last word. Don’s directed to move future posts on ACA to the bulletin board.
An 18 (or 21, or 23) year-old doesn’t necessarily understand the financial burden for which they are signing up each semester (call back to the thread here about how the human brain isn’t done developing until age 26), what happens if they have to go without paying on those loans for a year or two due to hardship, the ramifications of compounding interest, etc. Add to that the fact that students aren’t signing up for one loan; they are signing up for individual loans each semester, and you’ve got a recipe for bad decision making.
Furthermore, they aren’t always even given the benefit of true disclosure. The very entity benefiting from the loans (the university) is the one acting on behalf the Sallie Mae (or whomever). I spent more than my fair share of time at the financial aid office back in the day; it’s just sign here, here, and here for each of the loans/grants/scholarships you have that semester. Then onto the next office to enroll in classes; it’s a nice assembly line they have going there.
Plus student loans take advantage of the idealism of youth. What 22 year-old doesn’t think that the world and all of its possibilites aren’t before them? Their future is rosy…they are 22 and their possibilites for them is endless (FYI- they are also the first to experience TRUE, all-consuming love). So of course “future them” is going to be able to handle this burden. Future Them is [i]freaking[/i] [b]awesome[/b]!
Perhaps the worst of it all is that student loans are a special, protected class of loans, thanks to Congress. There is no refinancing once you’ve consolidated. Never. You’re done. So whatever the going interest rate is at the time, is it. Forever. There is also no negotiating; if you can’t pay back your loans and find that even the smallest payment plan is beyond your means, you’re screwed. That principle just gets racked up, you will likely default, and your credit is ruined. Once your credit is ruined your ability to find good-paying jobs is diminished. Lather, rinse, repeat.
And discharging student loans in bankruptcy is next to impossible (again, thanks Congress!) because somehow getting into debt trying to educate yourself is uniquely ripe for abuse, but the person who took a second mortgage to pay for jet skis, awesome TV’s, and a trip to Cabo just made an honest mistake.
Oregon is talking about a program to defer student debt by taking 3% of student’s pay after they graduate for 24 years. What do you think of that?
I say take the government out of micromanaging the student loan business.
Look at your example…the state of Oregon is trying to fix the problem the federal government created. When the state messes up, probably by anticipating that they are going to make a certain amount with this program but then don’t, there will suddenly be a budget shortfall. In all likelihood something critical and heart-tugging like monies allocated for school districts (aka, teachers and beloved programs) will have to be cut, so the state will need to “raise revenue.” Then they will enact a tax, which in turn affects consumer spending (or something like that), so consumers adjust their behavior, and so they need more revenue to make up that difference…yadda, yadda, yadda.
How about, if nothing else, the federal government allowed student loans to be treated like other loans? If nothing else, let consumers negotiate loan terms once they’ve been out of school for a decade, so that interest rates can be related to the current economic situation?