Home > MetNews

Bill to slash student debts
Dems aim to reduce college loan burden in first 100 hours
By Allison Bailey
abaile19@mscd.edu

Photo by Jason Small • jsmall4@mscd.edu The line for the Office of Financial Aid was out the door and down the torn-up hallway on the first day of spring semester. Sophomore Daniel Feely, right, answered quick, general questions in the hallway to try to ease aggravation and shorten wait times. Student loans are an integral part of many students’ educations, and Democrats have made lowering loan interest rates a priority in the new congressional session.

Congress discussed legislation to cut interest rates in half on federally subsidized student loans this week as their new legislative session began.

A federally subsidized loan is awarded to a student on the basis of financial need. The subsidized loan does not charge the student interest before the repayment period begins or during deferment periods.

The proposed legislation would cut interest rates from 6.8 percent to 3.4 percent over the next five years, according to Lawrence Pacheco, press secretary for Mark Udall, D-Colo., who is co-sponsoring the bill. Democrats have been working on the bill since July, Pacheco said.

According to a recent Newsweek poll, the bill is widely supported by both Democrats and Republicans in Congress as well as 88 percent of the American public.

Intended to make higher education more accessible, the bill would also relieve some of the financial burden that student loan debt places on college graduates, Pacheco said. Due to rising tuitions and fees, there are greater financial barriers between young Americans and a college education.

“(The bill is) important because our economy rests on having a highly skilled work force,” Pacheco said.

The proposed legislation is part of the Democratic agenda for the first 100 hours of the new legislative session, which marks the first time since 1994 that Democrats have controlled both the House and Senate.

If passed by Congress, the bill will still require presidential approval, and Pacheco said he was unsure how long that process might take.

It is still uncertain how the student loan interest bill might affect the loan industry if it is passed, said Sheri Bogardus, vice president of marketing at Student Loan Funding, a lending company that is a subsidiary of Sallie Mae, one of the United States’ largest loan providers.

The bill might cut the return on federally subsidized student loans by $6 billion, Bogardus said.

“They could ask the lenders to give up some of the return,” she said. “That’s how the government has done that in the past, asking businesses for help. Usually the lenders have been willing.”

The funds could also come from additional taxes or from other resources such as funding cuts from other programs.

Bogardus said she would like to see the money coming from programs other than those aimed at helping college students financially, such as grants.

“If they take money from those programs then they aren’t investing, they’re just moving money around,” she said.

Lenders are waiting to see how Congress plans to finance the bill and piece out the details, but most are supportive of the idea of reducing interest rates if it benefits students, Bogardus said.

“We support any effort to support higher education and make it more accessible to students,” she said.

In addition to reducing interest rates on student loans, the Democratic agenda includes legislation on several controversial issues, including federal funding for stem-cell research, lobbying reform, raising the national minimum wage and implementing recommendations made by the 9/11 commission.