fresh voices from the front lines of change







As the deadline of July 1 approaches for preventing student Stafford Loan rates from doubling to 6.8 percent, it seems less and less likely Congress will be able to push any legislation through to help our students. Student groups are concerned, certain members of Congress are concerned, and even economic experts are sending out warnings about what the increasing amount of student debt could to do our economic recovery.

I heard from representatives of all three of these groups speak Wednesday on what we need to do to solve this problem, and how Congress should move forward before and after the deadline has passed.

Tiffany Dena Loftin, President of the United States Students Association, was kind enough to speak with CAF on the USSA’s plan post-July 1. Their demands are simple – one permanent 3.4 percent interest rate for the federal subsidized Stafford Loan, mandatory Pell Grant funding, income-based repayment as the default option for borrowers, and the ability for private student loan debt to be discharged under bankruptcy law.

Loftin discussed with me the USSA’s recent meeting with the CEO of Sallie Mae, John Remondi, how they will continue to motivate students moving forward, and her own personal experience with student loan debt.

Loftin and the USSA is already setting their sights beyond the July 1 deadline toward a long-term solution for current borrowers and future students. The group is continuing to push for California Rep. Karen Bass’s bill that would cap interest rates at 3.4 percent and allow the rest of a student’s debt to be forgiven if the borrower makes payments equal to 10 percent of their discretionary income for 10 years – known as the "10/10 program." That bill would also allow students who currently have debt that exceeds their income to convert their loans into federal direct loans, and then apply for the 10/10 program.

Over at the Center for American Progress’s Student Loan Debt event, Sen. Kirsten Gillibrand (D-N.Y.) was echoing Loftin’s points. Her bill requires the Education Secretary to automatically refinance almost all federal loans with an interest rate above 4 percent to fixed-rate, 4 percent loans, which she stated would lower nine out of 10 federal student loan rates. This bill affects borrowers already saddled with debt, and she wishes to couple it with a bill that freezes interest rates at 3.4 percent for two years for new borrowers until Congress can come up with a more comprehensive solution.

Finally, CAP held a student loan debt panel with Anne Johnson, the director of Campus Progress Action, Rohit Chopra, the student loan ombudsman at the Consumer Financial Protection Bureau, and David Bergeron, the vice president of postsecondary education at the CAP Action Fund. The panel focused on how to improve the situation for those students already saddled with debt, but also make college more affordable and student loans more manageable for those wishing to attend college in the future.

Johnson pointed out that 60 percent of the $1.1 trillion of student loan debt is held by people more than 30 years old, and 15 percent is held by people over 50. So this problem is not just affecting our young people; it is affecting the lives and decisions of young families as well.

Bergeron stated that one of the most important solutions to this student loan debt problem is making borrowers more aware of income-based repayment and pay-as-you-earn options. These repayment options are the best choice for students, but only 11 percent of borrowers are taking advantage of them. Bergeron stressed that we need to extend the pay-as-you-earn option for all borrowers.

Chopra discussed the need to be able to refinance student loan balances, as homeowners are able to do with their mortgage rates. In this way the prices can better reflect the actual credit risk of the borrower.

Both agreed that student loan debt will be an extreme drag on our economy, and something must be done now to rectify this problem as the risk of attending college gets higher and the return on investment for going declines.

Hopefully their insights will be useful in the debate going forward. Regardless of what happens July 1, the problem of student loan rates and college affordability is not going to just disappear without further action.

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