(Washington, D.C.) Congresswoman Cathy McMorris (WA-05) released information today to set the record straight regarding the student loan provisions in the Deficit Reduction Act. The bill will expand college access for low-and middle-income students while generating savings for taxpayers by eliminating program waste and inefficiency, trimming excess subsidies paid to lenders, and placing student aid programs on a more stable financial foundation.
“I am committed to ensuring students have every opportunity possible to gain access to education, which will lead to a stronger economy,” said McMorris. “Schools in Eastern Washington, such as Washington State University, Gonzaga University and Whitworth College all have students who rely on federal loans to help fund their higher education. When the Perkins Loan Program was slated for elimination, I fought to guarantee that it would continue to operate, ensuring disadvantaged students low-interest loans. By making common-sense reforms and eliminating waste we can ensure that more Eastern Washington students will have the opportunity to earn a college degree.”
Opponents have claimed that the proposals would “result in the typical student paying $5,800 more for college loans.” The $5,800 figure is misleading and unfair to students. Below are the facts about the reforms that will strengthen the federal student loan program:
Loan interest rates:
Current student loan interest rates are just 4.7 percent. McMorris voted to repeal the jump to a 6.8 percent fixed interest rate that would prevent students from taking advantage of low market-based rates. Instead of imposing an arbitrary fixed interest rate that would increase costs for borrowers, this bill protects variable interest rates for students. Borrows save money under a variable interest rate structure. Since 1997, borrowers with a variable rate would have paid an average interest rate of less than 6.8 percent on loan with a standard 10-year repayment.
Ending excess subsidies:
McMorris voted to permanently eliminate practices that have allowed some lenders to collect a minimum 9.5 percentage rate of return on some student loans – at the cost of taxpayers.
Increases lending rates for first and second year students:
To give students additional borrowing opportunities, McMorris voted to increase the amount that first and second year college students may borrow. Studies show that students who complete their first two years of college are more likely to continue on to graduation. Under this bill, first-year student limits will increase from $2,625 to $3,500 and second-year student limits will increase from $3,500 to $4,500.
Loan Deferment for Military:
McMorris voted to add a new provision under which military or National Guard personnel who are serving on active duty during a war or other military operation or national emergency may defer their loan payments for up to three years.
Loan Forgiveness for National Service:
The bill provides for loan forgiveness for service in areas of national need and stipulates specific areas of service, including early childhood educators, nurses, foreign language specialists, librarians, certain teachers, and others.