Student loan debt is hampering economic recovery and delaying attainment of the American dream, a trio of students, two university presidents, and U.S. Sen. Richard Blumenthal said Monday at a Capitol press conference.
Last week, the U.S. Senate passed a bill that will reset interest rates to 3.4 percent for subsidized Stafford loans for students entering college this year, but it also allowed rates to rise as high as 8.25 percent in the future. The rates are tied to a 10-year Treasury note that also adds a percentage to the interest rate based on the type of loan, and it caps how high the loans can go.
Blumenthal voted against the bill, which passed 81-18, because he felt it would “unconscionably raise interest rates on new loans to students.”
The U.S. House is poised to pass a bipartisan compromise, according to news reports, and President Barack Obama said last week that if the House passes the Senate bill he will sign it into law right away.
In the meantime, Blumenthal said he will continue to offer solutions to government-backed student loan programs. He suggested opening up the “Pay As You Earn” program to all graduates, not just those who entered college after 2007. He would also amend the tax code to make the benefits received under that program “non-taxable.” The “Pay As You Earn” program allows students with certain types of loans to lower their monthly payments and have a certain amount of the loan forgiven if they continue to pay it consecutively for 20 years or in 10 years if they go into public service.
For the graduating class of 2011 in Connecticut, 62 percent borrowed to pay tuition. Of those students, their average debt at graduation was $29,380.
“We ought to be investing in students, not profiting off their backs,” Blumenthal said.
The U.S. government is scheduled to earn $51 billion in annual profits off student loans this year. There is more than $1 trillion in student loan debt nationwide.
Eric Bergenn, a graduate of Central Connecticut State University, said the last few years have been a “slow and grueling economic recovery, but it’s only going to recover if we can strengthen our workforce.” He said educational attainment should be part of that equation since it’s an indicator of unemployment.
Sara Schroedl, who is studying to be a pharmacist at the University of St. Joseph after graduating from CCSU, said that instead of going to work in a job she wants, she’s going to have to find a job that helps her pay off her student loans.
“I really don’t see my future in terms of following my dream. I see my future in being able to pay off my loans,” Schroedl said. “I don’t think that’s something I should accept. It’s something we should all work toward eliminating.”
Sam Cheney, a recent Quinnipiac University graduate, said there’s a myth out there that students are attending colleges that are too expensive for them and they shouldn’t have gone. However, the advice given by high school guidance counselors is to “go to the best school you can,” Cheney said.
“Don’t worry about the sticker price” was a common mantra, he added. That means the country is entrusting college students, who are unable to rent a car, with five figures worth of debt. For Cheney, it means he’s paying more in student debt every month than he pays in rent.
“Higher education needs to be an investment this country makes, not simply a decision by individuals to put on debt for themselves and maybe make it after they graduate,” Cheney said.
Elsa Nunez, president of Eastern Connecticut State University, and James Schmotter, president of Western Connecticut State University, also called for reforming the student loan programs.
Currently, 70,000 students in Connecticut are paying student loans.
She said allowing interest rates to double on July 1 to 6.8 percent adds about $5,000 in debt to each student loan and $13 million in debt over the next 10 years. The per-student loan debt has increased 50 percent since 2005, she added. And the gross student loan debt has grown 400 percent this past decade.
Schmotter applauded Blumenthal’s “political courage” and desire to “do the right thing” by voting against the bill. He said the Senate vote last week simply “pushed the problem down the road.”