WASHINGTON, D.C. | May 23, 2013 -
We’re here today to address a crisis of Washington’s own making. Several years ago, Congress decided politicians – not the free market – were better equipped to set student loan interest rates. Politicians set a fixed rate of 6.8 percent for all loans, and then decided to advance legislation based on a campaign promise that would temporarily phase this rate for subsidized Stafford loans down to 3.4 percent.
Last summer, with the expiration of the lower rate scheduled for July 1, 2012, debate about student loans reached a fever pitch. The president began touring college campuses, calling on Congress to prevent the increase that his own party set in motion back in 2007.
As I said at the time, no one wanted to see interest rates double – particularly at a time when 1 out of every 2 college graduates was struggling to find a full time job. But we need to move away from a system that allows Washington politicians to use student loan interest rates as bargaining chips, creating uncertainty and confusion for borrowers.
When Congress approved legislation to temporarily stave off the Stafford Loan interest rate increase, my colleagues and I lent our support with the promise that we would use this time to work toward a long-term solution that better aligns interest rates with the free market.
The Smarter Solutions for Students Act accomplishes this goal by simply moving all federal student loans – except Perkins loans – to a market-based interest rate system. This responsible legislation builds upon a proposal put forth by President Obama earlier this year.
The Smarter Solutions for Students Act is a narrow piece of legislation that will provide a lasting solution to the problem facing the federal student loan program. Unfortunately, some critics would rather kick the can down the road and simply extend the current arbitrary rates at a taxpayer cost of roughly $8 billion dollars. They want to continue the failed status quo and leave politicians in charge of setting rates.
Earlier this week, the Washington Post called it a “weird fact” that student loan interest rates “aren’t pegged to anything real, just to the whims of Congress, which inevitably uses student loans as political playthings.” Students deserve better. They shouldn’t have to watch as Washington holds their interest rates hostage each election year. They shouldn’t have to deal with the uncertainty that comes with waiting for politicians to cobble together another temporary fix to keep interest rates in line with the market.
We have an opportunity today to get politicians out of the business of setting student loan interest rates. We have an opportunity to provide students more stability in the long run by putting an end to quick fixes and campaign promises. And we have an opportunity to build upon common ground with the administration and advance a bipartisan solution that’s a win for both students and taxpayers.
I urge my colleagues to support the Smarter Solutions for Students Act and reserve the balance of my time.
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