College students around the nation may have to pay back less of their student loans under new legislation passed by the U.S. House of Representatives.
The bill passed 356-71 last week and would halve the interest rate on Stafford loans, a type of federally sponsored financial aid, by 2011 if passed by the U.S. Senate and signed by the President.
If the “College Student Relief Act of 2007” is signed into law, the bill would reduce the interest rate of federally subsidized student loans from 6.8 percent to 3.4 percent over a four-year period. President George W. Bush has already stated opposition to the act.
According to the University’s financial aid office, more than 3,000 students currently receive subsidized Stafford loans.
The proposal is the fifth of six issues the new Democratic Congress – led in the House by Speaker Nancy Pelosi (D-Calif.) – promised to address in their first 100 hours.
“Today’s bipartisan vote to cut the interest rate in half … will help make a college education more affordable and more accessible for our next generation of leaders and innovators,” Pelosi said in press release. “At a time when college tuition continues to skyrocket, this crucial legislation will help remove some of the barriers to a higher education.”
After the final cut in 2011, the average student borrower would save $4,420 due to the interest rate reduction, according to a study by the U.S. Federation of Public Interest Research Groups.
According to the study, there were 16,000 subsidized loan borrowers in D.C., and roughly 5.5 million nationwide during the 2004-2005 school year.
According to Daniel Small, director of GW’s Office of Financial Assistance, the government pays the interest on subsidized Stafford loans while the student is in college, but students with unsubsidized Stafford loans have interest accrue while still in school.
Eligibility for subsidized loans is based on financial need, but any student can receive an unsubsidized loan.
Supporters of the proposal include U.S. Reps. alumni and Congressmen Timothy Mahoney (D-Fla.) and Steve Israel (D-N.Y.). Both Mahoney and Israel were among the 211 cosponsors of the bill.
“(Israel) thinks it’s becoming increasingly difficult for working, middle-class families to send kids to college, and one of the best ways to address that is to lower interest rates on student loans,” said Meghan Dubyak, Israel’s communications director.
Although 124 Republicans joined the House Democrats in the bipartisan vote, the bill was passed over objections from the White House. In a statement released Jan. 16, Bush said the act would encourage additional loan debt, fuel the upward college tuition spiral and only help college graduates – not current students.
Small said the University is neither advocating nor condemning the legislation.
“At this point, the University has no position on the legislation since the process is not over,” Small said in an e-mail. “As long as the changes benefit students and has no side-effects to disadvantage other students, than the legislation is good.”
The act would not affect students currently using Stafford loans, Small said, since it would not go into effect until at least July 2007. He said only those students who are paying off their subsidized loans between 2007 and 2011 would benefit.
Sophomore Paul Dionne said his problem with the bill is that the government should leave such cuts to education and finance experts.
“The people who work in the House don’t know what the hell they’re doing when it comes to economics,” he said, adding that the bill may further damage the federal government’s debt.
According to a report by the Congressional Budget Office, the act would reduce payments to loan lenders and cut returns on student defaults to avoid further budget deficit.
Other students said they were supportive of the bill.
“That’s great for whoever it applies to, even if it doesn’t apply to me,” first-year graduate student Amanda Schwenkel said, “because I know so many people rely on the loans to finance their education.”
Schwenkel, a student in the Graduate School of Education and Human Development, said half of her Stafford loans were subsidized, and expects to owe $36,000 in loan debt at the end of her second year under the current interest rates.