Students from Tennessee and all over the country are graduating from high school about this time, and roughly 70% of them will go to college next year. Taxpayers will help many of them afford a college education through taxpayer-subsidized student loans—the cost of which for students will go up on July 1 if Congress doesn’t act.
I cosponsored a proposal with my Republican colleagues that would take advantage of today’s low interest rates and head off the interest rate increase for all students. The idea is very simple: If we are going to provide $133 billion in student loans this year, let’s loan the money to students at exactly what it costs the government (putting the interest rate at about 4.75 percent) with all the money covering the cost of collections, defaults and administration.
This would mean the government is not trying to make a profit on the students, as it is now. The proposal would also fix the loan rate, so that even if rates go up on new loans taken out in future years, it won’t affect existing loans.
Our legislation would be a permanent fix for all students who take out federal loans, and it should be an area where the U.S. Congress can find broad agreement. The Republican majority in the U.S. House of Representatives has passed a bill based on the same idea. President Obama’s budget proposed a similar idea.
But Democrats in the Senate majority have come up with a short-term fix for only 40% of the loans taken out over the next two years. Not only do they plan to leave the rest of the borrowers high and dry, but their proposal raises taxes to do it. It’s unconstitutional since it is a revenue bill originating in the Senate.
If Congress does not reach an agreement before the end of the month, the cost of these loans for students will go up. Our proposal would save students money now, but would also ensure that in the future, loan rates reflect the market. It is fair to students, and it is fair to taxpayers.
Hopefully Democrats in the Senate will stop playing politics. You might say this is the opening act of the circus: it will not take long, and it may be a little embarrassing, but after Congress gives it some thought, maybe we can sit down and solve this problem.
I think we should show these students that we support them. Instead of leaving them high and dry, we should be congratulating them—and giving them their ticket to the middle class.