After the United States Congress failed to reach a deal and act on one of the most contentious issues for young people in America, student loan rates doubled to nearly seven percent Tuesday, but some lawmakers are hopeful it could be reduced when Congress convenes following the Fourth of July holiday weekend.
The 6.8 percent student loan rate is actually a lot higher than what private lenders charge and it has been estimated by the Joint Economic Committee in Washington that the approximate cost to the average student would be about $2,600. However, this increase only applies to new, subsidized loans for those undergraduate students in need.
The White House vowed to come to an arrangement on the student loan rate before students return to the classroom in autumn and sign the student loan papers, which is usually done around August. “We are confident they will get there and that the solution will include retroactive protection for students who borrow after July 1 so that their student loan rates don’t double,” said Matt Lehrich, a White House spokesperson.
It has been expected that the Senate will vote on extending the current rates by one year on July 10 – Congress already passed the Smarter Solutions for Students Act, which was similar to President Obama’s concept. This is being supported by many Senate Democrats, including Massachusetts Senator Elizabeth Warren.
However, not permitting the student loan rates to rise will cost the federal government even more money, according to the Congressional Budget Office (CBO). The federal budget watchdog agency warned that not allowing it to double will cost taxpayers more than $41 billion between 2013 and 2023.
One proposal being floated around is to tie loan rates to the 10-year Treasury note yield. Senate Majority leader Harry Reid said it would never be able to pass the Senate and noted that he personally could not support something that doesn’t further help and protect students and parents.
Adam Jentleson, a spokesman for Reid, told Fox News that there is no deal in sight because the Republicans want to reduce the budget deficit “on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations.”
The GOP, though, is passing the blame onto the Democrats.
“It’s disappointing that Senate Democrats left town without taking action on behalf of students and their families,” said House Speaker John Boehner in a statement. “Indeed, the divisions among the president and his own party are directly responsible for the current impasse that will now result in higher borrowing costs for students already coping with skyrocketing tuition bills.”
The Project on Student Debt reported that about two-thirds of college graduates left school with an average of $26,600 debt. In total, student loan debt stands at roughly $970 billion and is actually higher than credit card debt, automobile loans, consumer debt and other forms of non-mortgage debt.
In the past week, there have been various articles on CNN, USA Today, MSN and elsewhere of numerous college graduates who owe the government thousands and thousands of dollars, can’t find a job in their respective field and still can’t move out of their parents’ home.