June 18, 2018
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Remove one of college students’ greatest threats: Congress

Carter F. McCall | BDN
Carter F. McCall | BDN
Sen. Angus King.


For months, Congress has wrangled over the best way to overhaul the federal student loan program. Democrat and Republican solutions alike have failed to gain enough support, prompting interest rates on subsidized college loans to double to 6.8 percent on July 1. The rate for more commonly held unsubsidized loans was already at an unreasonable 6.8 percent.

The problem is not an intractable one, however, as the Senate proved Wednesday night when it voted, with a surprising tally of 81-18, in favor of a compromise bill that incorporates elements favored by unlikely allies — many Republicans and some Democrats, including the president. The House will take up the bill next, and it appears likely to pass.

The legislation offers an intelligent, long-term solution for student loan interest rates. It’s also just one of many ways Congress can help students at a time of increasing loan delinquency rates and spiking college costs. It would tie student loan interest rates each academic year to the U.S. Treasury 10-year borrowing rate — generally the lowest rate available — plus a small markup for costs associated with defaults, forgiveness and deferments. The rates, therefore, would no longer be subject to the political whims and inaction of Congress.

The legislation replaced a similar House bill and was a collaboration among Sens. Angus King, I-Maine; Tom Harkin, D-Iowa; Dick Durbin, D-Ill.; Joe Manchin, D-W.Va.; Tom Carper, D-Del.; Lamar Alexander, R-Tenn.; Richard Burr, R-N.C.; and Tom Coburn, R-Okla.

“It’s what I came here to do,” King said after the vote.

The bill would set interest rates this year to 3.86 percent on subsidized and unsubsidized loans held by undergraduates, 5.41 percent on unsubsidized loans for graduate students and 6.41 percent on PLUS loans, which are taken out by graduate students and parents. The rates would be retroactive to loans taken out after July 1. They would also be fixed for the life of the loan; each year new enrollees would lock in at that year’s rate.

There would be a ceiling, however: The rates would never exceed 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for PLUS borrowers.

The caps are meant to address Democrats’ concerns, as previous Republican proposals did not impose a rate ceiling. The yearly lock-in rate is also an improvement — over a separate bill in the House that would let interest rates fluctuate.

Though some liberals opposed the bipartisan bill because they would rather extend pre-July interest rates, a couple of proposals to maintain the status quo already failed to gain enough support. Even the president, in his proposed 2014 budget, would tie interest rates to the government’s cost of borrowing, and he supports the current bipartisan legislation.

This country’s loan program is one part of a larger strategy to help students with college. Other efforts include federal tax credits and the federal Pell grant program. But unlike a grant program, the federal government should not be losing money on loans. In the same vein, it shouldn’t be profiting off the debt of students, either, as it is currently doing and as the House bill would have continued.

The bipartisan legislation aims to be deficit neutral, though it would result in some government revenue over the next decade: The Congressional Budget Office estimates $715 million between 2013 and 2023. While it’s a relatively small amount when considering the government plans to issue $1.4 trillion in loans over that time, lawmakers could satisfy detractors by putting the revenue toward Pell grants or another student-aid fund.

Those who voted against the bill voted to maintain student loan interest rates at 6.8 percent. Those who voted in favor voted to lower borrowing costs. Once members of both bodies of Congress settle on a solution, they can get on with other important discussions about the student loan debt crisis, such as how to address increasing college tuition costs and improve program quality. The challenge then, of course, will also be to garner bipartisan support and focus on long-term reform. As Wednesday’s vote showed, though, it is possible.

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