The U.S. House of Representatives will vote on a proposal today that could halve the interest rates on federal need-based Stafford loans over the next six years.
Rep. George Miller (D-Calif.) proposed the bill, titled “The College Student Relief Act of 2007,” to reverse last year’s Republican-led increase in interest rates. This past July, interest rates were increased by 1.84 percent on the Stafford loan, the largest federal student loan program, to a fixed 7.14 percent. The proposed bill would lower the interest rates .68 percent each year for six years until it reaches 3.4 percent in 2011.
In a speech before the House last Friday, Miller said college is becoming increasingly difficult for students and parents to fund.
“Millions of college students and parents of college students are struggling to come up with the financial resources to pay for college,” said Miller, who is the chairman of the House Committee on Education and Labor.
According to UC Spokesman Chris Harrington, the UC staff in Washington worked closely with Miller on his proposal. Harrington said the bill was part of the Democratic Congress’ list of promises to fulfill in its first 100 hours of power.
“Miller has a track record of focusing on students,” Harrington said.
Miller’s proposal is the first in a series to strengthen higher education funding, said Luke Swarthout, U.S. PIRG Federal Higher Education advocate.
“The Senate, later on in the year, plans on taking on all of the higher education policy,” Swarthout said.
In a letter to Miller, UC President Robert Dynes said students would greatly benefit from these interest rate reductions. He said the decrease in interest rates would save the average student approximately $4,300 over the lifetime of their loans, which are considerable.
“Nearly half of the UC undergraduate class of 2005 graduated with an average debt of $13,300 from subsidized loans,” Dynes said in the letter.
UCSB Director of Financial Aid Ron Andrade said the proposed interest rate reductions would not affect students until after graduation when they begin to pay back their loans. Due to the fixed nature of the interest rate decrease, students taking out loans this year will not save as much as students taking out loans in two or three years.
Approximately 6,000 UCSB students currently have a Stafford loan, Andrade said. He said interest rate changes in the past have not necessarily had an effect on the number of loans taken out.
“Whether the interest rates are rising or falling, the amount of federal loans taken out generally stays the same,” Andrade said.
Bill Shiebler, UC Students Association President, supports the interest rate reductions, but is worried about reliance on student loans.
“A loan is a loan,” Shiebler said. “It is a mechanism for debt. If we really want to make higher education free to everyone, we need to remove the debt.”
Shiebler said he would rather see more money put toward more outreach programs and state grants for students.
“I see two objectives for our school system: One, to get high school students into college through outreach programs, and two, to provide what they need to be able to afford college,” Shiebler said.