Speaking to a room full of students at the state Capitol, U.S. Reps. Joseph Courtney and Chris Murphy touted a bill that would extend a 3.4 percent interest rate cut for the Stafford Loan program for at least a year.
Courtney, who introduced a bill that would extend the interest rate cuts for another year, said that Congress has 88 days to pass it, otherwise the interest rate will rise to 6.8 percent. The new rate would only apply to students who receive loans after July 1, the sunset date of the provision.
An increase in the cost of higher education has impacted the U.S. economy and hampered the country’s ability to innovate, Courtney and Murphy told the group of students that included about 30 from a Suffield High School and 10 from the University of Connecticut.
Murphy, who along with his wife Cathy Holahan used the Stafford Loan Program to pay for college, said that over the last five years the U.S. has dropped from No. 1 to No. 6 in terms of the number of 25-year-old residents who possess a college degree.
The reason, Murphy said, is that students are putting off school until they can afford it because of the rising cost. Since the year 2000, he said, tuition at state universities in Connecticut has increased by almost 100 percent. Meanwhile, Murphy said, family budgets have remained stagnant.
Further, in what critics construe as a negative milestone, the Federal Reserve Board reports that student loan debt now exceeds both car loan and credit card debt, totaling more than $1 trillion.
Courtney said that the Stafford Loan program is an asset for middle class families with up to $100,000 in adjusted gross income, while students of lesser means typically apply for Pell Grants.
Private loans often carry interest rates as high as 9 percent, accruing interest while students are enrolled.
Richard Bishop, director of financial aid at Central Connecticut State University said that his office advises students to exhaust all federal financial aid options before considering a private loan.
Former President George W. Bush signed the College Cost Reduction and Access Act in 2007, which he reduced the interest rate on Stafford loans from 6.8 to 3.4 percent for five years.
If the interest rate increases, students with $23,000 in debt would pay an additional $5,000 in interest over 10 years or an additional $10,000 over 20 years.
Sen. Jack Reed, D-Rhode Island, introduced a sister bill in the U.S. Senate, where Courtney expects it will be welcomed by the Democratic majority.
Michael Meotti, executive vice president of the Board of Regents, said that to increase economic output Connecticut must first increase its “stock of knowledge,” which requires some form of post-secondary education.
Broadening access to higher education, Meotti said, requires the cooperation of three critical investors: families and students, the state of Connecticut, and the federal government.
Meotti said that the federal government’s Title IV aid programs, which include both the Stafford and Pell programs, are “absolutely critical” to keeping college affordable.
“Without the federal government as an aggressive partner in investing in the future of Connecticut, we cannot maintain the longtime leadership role we’ve played in economic success and quality of life in this state,” Meotti said.
While maintaining that education always has been a bipartisan issue, Courtney admitted that Congressional Republicans may not be amenable to extending the loan increase.
Last Thursday, the U.S House of Representatives passed U.S. Rep. Paul Ryan’s budget plan without a single Democratic vote. The plan included a $200 billion cut to the Pell grant program.
“It’s clear that the majority in that chamber, as far as their long term vision for where they want this country to go, is completely the opposite of what we’re talking about here,” Courtney said.
President Barack Obama and U.S. Sen. Harry Reid both support a one-year extension, Courtney said.
Congress financed the initial interest rate cut by eliminating bank subsidies, but that money will run out July 1. The Office of Management and Budget, the president’s budget authority, estimated the cost of a one-year extension at $4 billion.
“Chris and I could, on the back of an envelop, give you about 10 ideas in terms of ways that we could pay for this,” Courtney said. He suggested cutting oil company subsidies, which cost about $4 billion a year.
“If you ask the American people, ‘should we give the oil companies $4 billion in tax subsidies or should we help middle class families pay for college through the Stafford Student Loan program?’ — I think we know how that poll result would end up,” Courtney said.