The interest rates for federal student loans will double from 3.4 to 6.8 percent as the Republican-favored Smarter Solutions for Students Act will go into effect today. Although the rates will double, the financially back-breaking bill has an 8.5 percent rate cap.
Combating the impending rate spike, Sen. Elizabeth Warren (D-Mass.) proposed her bill, the Bank on Students Loan Fairness Act, which was set to lower the student loan interest rates to match those of the giant Wall Street banks that only only pay 0.75 percent on its government loans. However, despite overwhelming support for the bill from politicians (56 percent of Republicans supported it) and university officials alike, Congress did little to even get the bill off of the ground.
Staunch supporters of Warren’s bill were outraged at the Senate’s inability to get the hopeful piece of legislation passed. Congressman John Garamendi (D-Calif.) called the bill’s stalling and the rate increase a “shameful failure” on the part the Republicans in Congress.
Opponents of the rate increase tried to prevent the raise on two occasions. Some Congressional members sought to at least freeze the rates at 3.4 percent for another two years by way of a discharge petition. The petition’s progression through Congress came to a grinding halt when enough Congress members failed to sign to make House Speaker John Boehner conduct an up-or-down vote on the rate extension.
Garamendi said that “It is shameful that my colleagues across the aisle in the House refuse to let us vote on simple legislation that preserves the subsidized Stafford Student Loan rate for two years.”
With the rate increases, it is projected that over 10 years, students could pay “an additional $3,000 on a $23,000 loan.” On a macroscopic level, the federal government stands to profit about $34 billion off of student loan interest rates. The interest rate placed on big banks only forces them to account for a mere $3.7 billion
This passage of Smarter Solutions for Students Act is a gigantic blow to struggling, new college graduates. The GOP refuses to acknowledge time and time again is that graduate underemployment has been on a steady incline, with little more than half of college grads working minimum wage jobs.
Joshua de Leon is a writer and researcher with Ring of Fire.