WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) released the following statement today after 43 Senators voted against legislation that would prevent the interest rate from doubling on federally-subsidized Stafford loans. Despite the fact that 51 senators—a simple majority—voted in support of the legislation, Republicans utilized a procedure that would require at least 60 votes for the bill to pass. Brown is the co-author of the Stop the Student Loan Interest Rate Hike Act of 2012, which would maintain the current interest rate on federally-subsidized Stafford loans, which is set at 3.4 percent, and prevent a hike to 6.8 percent scheduled for July 1st. More than 382,000 students across Ohio would be forced to pay significantly more in college loan costs unless Congress acts.
“Despite one last attempt before the Memorial Day work period to pass a common-sense bill to prevent the interest rate on student loans from doubling, some in the Senate have shown that they would rather drag this process out. In the meantime, hundreds of thousands of Ohio students are worrying about their financial future,” Brown said. “It’s disappointing that some in the Senate would rather preserve tax breaks for the wealthy than help our best and brightest afford the ever-rising cost of a college education. Ohio’s students deserve better than this and I will continue to fight to prevent their student loan rates from going up.”
Brown invited Ohio’s college students and their families to share their financial aid stories on his website at brown.senate.gov/CollegeLoanStories. Brown will continue to share, as he has for the last several weeks, some of the stories collected on his website with his colleagues through speeches on the Senate floor.
Student debt has reached nearly $1 trillion—exceeding credit cards and auto loans. Meanwhile, a new analysis released recently by the Associated Press found that half of young college graduates are either jobless or underemployed in positions that don't fully use their skills and knowledge.
According to the Senate Health, Education, Labor, and Pensions (HELP) Committee, a higher interest rate would add approximately $1,000 in loan debt per loan for the average student. The Stop the Student Loan Interest Rate Hike Act, which is fully paid for, would keep the student loan interest rate from climbing by eliminating a tax loophole that the watchdog agency, the Government Accountability Office (GAO), has determined is a problem that currently allows some shareholder-employees of so-called “S corporations” to avoid paying their fair share of Social Security and Medicare payroll taxes.
The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly-subsidized Stafford loans for undergraduate students to 3.4 percent over a set period of time, but the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but students still attending school after July 1st that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans, adding even more to their existing debt load.
Last year, Brown introduced the Student Loan Simplification and Opportunity Act of 2011, legislation that would simplify the student loan repayment process. This legislation would help borrowers avoid financial penalties for missed payments, save Ohio graduates money on their student loans, and bolster the federal Pell Grant program that helped send more than 240,000 Ohio students to college from 2008-2009.