We Must Protect the Investment of Future Generations
Ours is the land of opportunity. The age-old idea of the “American dream” is who we are. It drives the dreams we have and reassures us that success is attainable through hard work and ambition.
Generation after generation of Americans have pursued and yearned for their part of this dream. The wealth of opportunity available in our country has fueled the pursuit of knowledge in order to attain success. It is this American ambition that has kept dreams alive in our hearts, turning them into reality—century after century.
Better opportunity and the promise of greater success come with a higher price tag, often in the form of college education. When students consider colleges, they are immediately met with the excitement of a degree and all the possibilities it will bring, but this educational investment often comes with a hefty loan that includes interest rates that kick in shortly after college. According to the Chronicle of Higher Education, nearly 20 million Americans attend college each year, and nearly 12 million rely on student loans to cover costs. That’s 60 percent of college students.
The problem we’re facing today isn’t necessarily that students need loans to attend college. College education is valuable, and its cost is inevitable. However, it’s the uncertain, artificially set interest rates tied to subsidized loans provided by the federal government that makes the price of college less predictable and more complicated. According to the Consumer Finance Protection Bureau, the total outstanding student loan debt in the United States is about $1 trillion. Out of that amount, around $864 billion or roughly 85 percent comes from student loans provided by the federal government.
In 2007, the interest rate on federal student loans was 6.8 percent. Concerned with this additional cost burden, the Democrat-led House passed legislation to gradually bring interest rates down from 6.8 percent to 3.4 percent. That law expired in 2012, meaning rates would then jump back up to the original rate, doubling the rate paid on loans. However, last year Congress passed a one-year extension to allow time for lawmakers to come up with a better, long-term solution for loan rates. We are again quickly approaching that expiration date of July 1.
Unlike the Senate, the House recognized the fast-approaching problem of low rates expiring and doubling for borrowers. In anticipation of the deadline, we passed H.R. 1911, the Smarter Solutions for Students Act, which calls for reform of the borrowing system and shifts loan rates to move with the free market, rather than be set haphazardly by lawmakers. By allowing rates to reset once a year for all federal loans (except Perkins loans) and move with the free market (similar to the system between 1992 and 2006), this legislation ensures borrowers have access to lower interest rates when available, which benefits students going to college and families covering tuition. It also saves the taxpayers roughly $995 million over five years and $3.7 billion over 10 years, according to the Congressional Budget Office.
Even President Obama agrees that student loan rates need reform. In his fiscal year 2014 budget, he included a long-term proposal moving to a market-based interest rate. Senate Majority Leader Harry Reid, however, said Saturday, “We’re all working really hard to try and come up with something that’s good for the kids, young men and women who want to be educated. We’re not there yet.” In essence, the Senate has had since 2007 to find a long-term solution. When they missed the expiration date, we gave them more time. Why aren’t they there yet? Even the president is ready for a solution.
We all value the coming generation. They are the future doctors, teachers, writers, business people and community leaders, and they value education. We must preserve their opportunity to pursue higher education, and solving the student loan rate issue is the first step.