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Last updated on Friday, July 5, 2013
(UNDATED) - In a bipartisan act of calculated inaction and willful indifference, the Democrats and Republicans who run Congress passively allowed a key student loan interest rate for low- and middle-income students to double.
Martin Schram, of the Scripps Howard News Service reports senators and representatives weren't around for the fallout,the y'd already dashed out of town for their Fourth of July vacations.
An estimated 7 million low- and middle-income students receive these so-called subsidized Stafford loans each year. They represent a quarter of all student loan recipients. Last year, the 3.4 percent interest rate on those loans was extended for one year so Congress could reach a compromise solution.
Congress couldn't compromise - so, on July 1, the rate soared to 6.8 percent. Now those who can least afford it must pay twice as much in interest as those who got their loans before the end of June.
Depending on how much a student borrows, the estimated cost of a four-year college education could increase by anywhere from $1,000 to the $4,500 projected by Congress' Joint Economic Committee.
This would require low- and moderate-income students to pay 6.8 percent interest rates at a time when folks with excellent jobs and excellent credit are getting mortgages for, say, 3.9 percent and buying a new car with a zero-percent interest loan.
Also at a time when tuition costs are soaring and families are scrimping so their children will be able to go to college.
As the senators and representatives skedaddled out of town without acting on the loans, President Barack Obama didn't demanding that Congress simply extending the discounted Stafford loan interest rate until a permanent deal could be done.
The Republican-run House passed a proposal that would tie future subsidized Stafford loans to market-based rates.
A number of Republican senators are pushing a similar proposal. And Obama also offered a market-based plan in his 2014 budget. While Obama would lock in rates for the lifetime of the student loans, the GOP House plan would allow rates to climb year by year.'
Sen. Elizabeth Warren, D-Mass. has proposed a very different market-based plan. She wants to peg interest rates for subsidized Stafford student loans to the Federal Reserve's discount rate - presently just 0.75 percent. She cites a Congressional Budget Office report saying the federal government will make $51 billion from all student loans this year, not just the subsidized ones.
The new interest payments, forced upon already-overburdened students, would add hundreds of millions of dollars in federal revenue.
''We should not be profiting from students who are drowning in debt while we are giving great deals to big banks," Warren and Rep. John Tierney, D-Mass., wrote in a recent Boston Globe op-ed column.
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