WASHINGTON - The days of fixed-rate student loans could be coming to a close, with House Republicans on Thursday advancing a proposal that would link rates to financial markets.
The GOP-led House Education and the Workforce Committee sent to the full House a bill that would offer some students a better deal at first. Democratic critics warned that graduates would face steadily climbing rates and costs over the long haul if the markets change.
"Our families deserve better than this bait and switch," said Rep. George Miller of California, the senior Democrat on the committee, who led the opposition.
The Republican chairman of the panel, Rep. John Kline, said critics were giving too much credence to Congressional Budget Office figures that anticipate future interest rates and don't accurately measure real costs for the program that helps 36 million students.
"We don't know what these interest rates are going to be. No one actually knows what they will be," Kline said. "Pick your score and make your best guess."
Without Congress' action, interest rates for new subsidized Stafford student loans would double from 3.4 percent to 6.8 percent on July 1. Neither party wants that to happen, although there remain strong differences in the methods to dodge that.
Democrats attempted to hold the rates at 3.4 percent while Congress considers a long-term fix. Their proposal received no votes from Republicans, who hold the majority on the panel.
"Student loan rates should not be subject to the whims of Congress," said Rep. Virginia Foxx, R-N.C. "Students' families and taxpayers deserve a long-term solution. … This legislation offers predictability and simplicity."
Democrats were not swayed. "I'll tell you what's predictable: They'll be paying more," said Rep. John Tierney, D-Mass.
Under the GOP proposal, student loans would be reset every year and based on 10-year Treasury notes, plus an added percentage. For instance, students who receive subsidized or unsubsidized Stafford student loans would pay the Treasury rate, plus 2.5 percentage points.