Rates on subsidized federal loans will double from 3.4% to 6.8% on Monday July 1st because the House and Senate have failed to pass legislation to prevent it. Seven pieces of legislation were proposed that offered a variety of solutions but most have not made it out of committee. The ones that reached a vote died along party lines. Partisan politics has caused this gaffe that will exacerbate the student loan crisis.
Complicating a Simple Yet Urgent Issue
A simple piece of legislation that would extend the current rates for another year or two would have been a reasonable stop-gap measure. President Obama and many House and Senate leaders though tried to completely revamp the student loan interest rate system. This is a fine idea, but not when they had only a few weeks to prevent the interest rate increase. Why complicate the one simple issue that needed addressed with a complex debate over the overarching crisis when there’s simply no time to explore it properly before the 7/1 deadline?
Failure to Act in the Senate
There were two bills – one in the House and one in the Senate – that would have extended the 3.4% rate for two years to get some relief. Senate Bill 953 missed the mark because for no apparent reason they tacked onto the student loan bill riders on pension plan distributions and Oil Spill Liability Trust Fund modifications. What do pensions and oil spills have to do with student loans? This bill died because it couldn’t gain cloture.
Failure to Act in the House
In the House, HR 1595 never made it out of committee. This was the sole bill out of the seven proposed student loan laws that stuck to the pressing issue at hand. This proposed law simply extended the current rates from July 1, 2013 to July 1, 2015 which would offer relief and create a respite period to allow further discussion of the student loan issue without leaving borrowers in the lurch.
This resolution was introduced on April 17th. It was never brought to a vote and never made it out of committee. How hard can it be to review a piece of legislation that literally contains less than 50 words? It’s perhaps the most simple and straight-forward law I’ve ever read (see below). It had 167 co-sponsors, addressed the issue at hand and had no damning riders to pollute it. Yet it was never brought to a vote.
What this Means
Rates will officially double on 7/1. If lawmakers don’t come back from the Independence Day break and immediately pass a law that can be applied retroactively, the rate increase will stick. For the average student loan debt of $27,000 on a 10 year repayment plan, interest will rocket from $4,887 to $10,285 – that’s more than double! Monthly payments will increase from $265 to $310. For budgets already stretched tight, this may push them into delinquency. Grads saddled with excessive debt are not able to afford to get married, are postponing having children, buying homes and cars which is crippling our economy.
If you are frustrated by the failure of the House and Senate to act on this critical issue by the July 1st deadline, email or call to voice your disappointment. Also tweet your sentiments to #dontdoublemyrate and be sure to include your legislators. Find verified Congressional Twitter handles here.
To find out how this rate change will impact your payments and to explore alternate repayment plans, try Tuition.io’s free student loan tool to manage and optimize your debt. Also check out these other recent blogs on Congress and student loans: