WASHINGTON, D.C. ‚Äî U.S. Rep. Henry Waxman (D-Santa Monica) on Thursday joined efforts to force a key vote on legislation that would stop the doubling of interest rates on subsidized Stafford student loans on July 1.
Waxman and fellow Democrats signed a discharge petition that would force House Republicans to bring up H.R. 1595, the Student Loan Relief Act of 2013.
The bill would freeze the interest rate on federally subsidized loans at 3.4 percent for the next two years, giving Congress time to develop a long-term solution to student loan debt, supporters said.
If Congress fails to act interest rates on subsidized student loans will double from 3.4 percent to 6.8 percent for more than 7 million students and their families.
“Interest rates are at historic lows,” Waxman said in a press release. “This Democratic bill would freeze the current low 3.4 percent rate for the next two years. I represent more than 74,000 college and graduate school students and many of them have federal loans. Congress must act quickly to prevent rates from doubling on July 1.”
In 2007, Congress arbitrarily lowered interest rates on subsidized Stafford Loans to undergraduate students from 6.8 percent to 3.4 percent. However, this action was only temporary and was set to expire in 2012. Last year, Congress agreed to extend the 3.4 percent interest rate on these loans for one year while a long-term solution was worked out.
Democrats are launching a discharge petition to force action because the Republican leadership has refused to move forward on the H.R. 1595.
Republicans in the House have backed another measure, H.R. 1911, The Smarter Solutions for Students Act, which would move away from a system that allows politicians to “use student loan interest rates as bargaining chips, creating uncertainty and confusion for borrowers,” said the office of Republican Congressman John Kline, chairman of the Education and the Workforce Committee.
H.R. 1911 would move all federal student loans (except Perkins loans) to a market-based interest rate using a formula based on the 10-year treasury note plus a certain percentage depending on the type of loan accepted. Student loan interest rates would reset once a year, allowing rates to move with the free market.
The bill would set caps for certain loans to protect against high interest rates, Kline‚Äôs office said.
“By taking politicians out of the interest rate equation, the Smarter Solutions for Students Act will strengthen federal student loan programs and serve the best interests of both borrowers and taxpayers,” read a statement on Kline‚Äôs website.
Supporters say the bill is the long-term solution Democrats are calling for and would save the federal government $990 million during the next five years and $3.7 billion during the next 10 years.
The Student Loan Relief Act was introduced on April 17, and has more than 150 co-sponsors, including Waxman. But Republicans have failed to schedule a hearing on the bill. A discharge petition requires the House to consider the legislation once a majority of members of Congress (218) have signed it.
“A majority of new jobs in the next decade will require a college degree,” Waxman said. “It is an economic necessity that a higher education remains an opportunity for every student, not a perk for the privileged few.”
Waxman‚Äôs district includes UCLA, Pepperdine, Santa Monica College, and Mount St. Mary‚Äôs College.
Nationally, total student debt currently stands at $1.1 trillion, greater than credit card debt, according to Waxman‚Äôs office.
Under the Republican bill, students who borrow the maximum amount of subsidized and unsubsidized Stafford loans over five years would pay nearly $2,000 more in interest costs than if interest rates doubled, Waxman said.