Student Loan Bill Post-Mortem: The Ayes Have It
NEW YORK (MainStreet) When Tom Harkin (D-Iowa) gives kudos to a bill that he probably hates, it's probably not a good sign.
"Any way you look at it, this is a good deal for students and a good deal for their families," said Harkin in the wake of last night's vote to lower the interest rate of Stafford loans to 3.85% for the current year. "That's the way this place should run, on compromise. Legitimate, hard fought but on compromise." The bill passed with a vote of 81-18.
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The bill Harkin proposed earlier this year would have left rates on subsidized Stafford loans at 3.4%, 6.8% on unsubsidized Stafford loans and 7.9% on PLUS loans which are co-signed by a student's parents.
The bill that passed yesterday gave a lot of that away. It ties rates on undergraduate loans to the 10-year Treasury bill plus 2.05% points up to a maximum of 8.25%. Graduate loans have a 3.6% add-on to the T-bill up to 9.5%. PLUS loans would add 4.6% to the T-bill rate up to 10.5%.
Interest rates on each loan would reset each year linked to the T-bill rate. Individual loans would have the same rate for the life of the loan.
How divisive was the opposition to this bill? Of the 18 senators who voted against it, 17 were Democrats, all of whom favored a solution that kept rates at 3.4%--as did Harkin. But liberal critics of the bill believe what they didor didn'tvote for is a good, old-fashioned bait-and-switch scheme, where rates are low now but rate capsand, consequently, rateswill rise in the not-so-distant future.
Harken may have settled for cutting his loses now with a view toward recouping some of them through the re-authorization of the 1965 Higher Education Act which was first passed in 1965 and expires this year. It was last re-authorized in 2008.
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Lost in the shuffle was a proposal from Senators Al Franken (D-Minn.) and Patty Murray (D-Wash.) to channel some of the revenue from new loans to low income students. The amendment they introduced, the Bipartisan Student Loan Certainty Act, would redirect the Congressional Budget Office's (CBO) estimated $715 million the government would realize from new student loans to fund the Pell Grant Program for disadvantage students. While the amendment wasn't in the bill that passed yesterday, sources say it may surface in another round of legislation.
Former funny man Franken wasn't kidding when he said, "Our amendment would make sure that the additional profits from this student loan deal would go to making college more affordable by bolstering Pell grants. It's a basic American value that our students should get the best education possible and this will help them do just that."
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The CBO estimates that the Pell Grant Program, which provides need-based grants to low-income students, faces a $793 million shortfall by fiscal year 2015. The amendment would allocate the surplus savings from the student loan dealprojected to be $715 millionto protect Pell grants.
Supporters of the Franken-Murray amendment include the American Association of Community Colleges, the American Council on Education, the American Federation of State, County and Municipal Employees, the Committee for Education Funding, the National Association of Workforce Boards, the National Association for Student Financial Aid Administrators and The Institue for College Access and Success.
--Written by John Sandman for MainStreet