Boston Schools Back Warren’s Proposal To Stall Student Loan Interest Rate Increases
As the deadline nears for the potential inflation of student loan interest rates, Congress can’t seem to agree on the best approach to help incoming students manage their money while pursuing a college education. But dozens of Boston area schools have stepped up in support of a proposal put on the table by Sen. Elizabeth Warren which would essentially stop interest rates for students to borrow from doubling, and set the rates equal to those given to large financial institutions like banks.
Starting July 1, student loan interest rates are set to jump from 3.4 to 6.8 percent, something Warren has called a “threat” to economic recovery efforts. Warren’s proposal, called the “Bank on Students Loan Fairness Act,” would allow students to borrow funds at the same low rates as banks do from the Federal Reserve, roughly 0.75 percent, for one year, giving Congress enough time to figure out “a fair, long-term solution on student loan interest rates.” The act is co-sponsored by Congressman John Tierney.
The Republican-controlled House of Representatives recently passed a bill that would stall those rates for now, however, it would allow them to increase at a later date. President Barack Obama has said he would veto the bill once it lands on his desk. “If Congress lets student loan interest rates double this summer, our kids will pay rates nine times higher than the big banks on their government loans. That’s wrong,” Warren said in a statement. “We should be encouraging our students by investing in their education. Keeping interest rates low not only will help young people who are drowning in debt, but also will strengthen our economy and help grow the middle class.”
Warren was in Boston last week to promote the “Fairness Act,” and since her time in the city has garnered the support of more than a dozen local colleges and universities, including Northeastern University, Emerson College, Babson College, Bentley University, Brandeis University, and Boston College. “As college presidents, we have a responsibility to do all that we can to maintain affordability, and ensure that students graduate as quickly as possible,” wrote Leonard Schlesinger, president of Babson College, in a letter addressed to Warren.
Schlesinger said last year the school provided $23.8 million in need-based institutional aid to undergraduate students. “Unfortunately, students graduating today are still faced with a difficult job market. During these economic times, it is critical that interest payments remain as low as possible so that students can repay their loans…if [they] were to double in July, it would have negative consequences on thousands of students, putting them at a greater risk of falling behind on defaulting their payments.”
Since she came to the city, a host of local organizations have also vowed to stand behind the proposal, including the Association of Independent Colleges and Universities in Massachusetts. “Senator Warren’s and Congressman Tierney’s legislation is a creative, intermediate solution to the pending doubling of the student loan interest rates. The student loan program should not be a profit center for the Federal government. In this tight economy, it is both fair and smart to keep student loan interest rates low and affordable for recent graduates,” said Richard Doherty, president of the AICU.
According to officials, because the Senate is currently in recess this week, at the earliest they could take up the act next week with a package of other higher education-related proposals. But the deadline to take action is fast approaching.