SEATTLE — It’s a tough day to be a college student.
Loan interest rates doubled Monday, July 1, because Congress was unable to come up with a plan to avoid the increase. Sen. Patty Murray and other Democratic members of Washington’s congressional delegation joined students at the University of Washington to urge their colleagues to act.
“College is already too expensive,” Murray said. “Congress should not make it worse.”
Before Monday, the rate on a typical student loan was 3.4%, but now that has shot up to 6.8%. That new rate will affect more than 100,000 students across Washington state who depend on loans to go to school.
“These students do not deserve to pay more,” Murray said. “They deserve our help.”
Murray and other members of Congress here are trying to freeze the low rate until Congress, which has stalled on this issue, is able to come up with long-term plan for student loans. Otherwise, they argue, students are going to suffer.
“For millions of families across the country, that is a tax hike of $1000,” she said. “That is not fair to students. It is absolutely not good for our economy. And Congress has to act to fix this. “
Congressman Jim McDermott, D-Seattle, argued that raising rates will benefit lenders at the expense of students.
“What we are doing is indenturing them to banks for a long period of time, and it’s just not fair and it’s not necessary,” he said.
The Republican-led House passed a bill that would tie student loan rates to the rate of a 10-year government Treasury bill, plus a premium. That would prevent rates from doubling right away, but that does mean they would fluctuate with the market, with a cap. Supporters of that approach say it that would get the government out of the rate-setting business, and, ironically, that it would actually help with college costs.
“As long as we feed cheap, free money to students, there’s no control on colleges from raising tuition because students can still go out and get the loan money,” said Kirby Wilbur, chairman of the state Republican Party.
Wilbur believes part of the solution is holding the line on tuition, something the Legislature just agreed to in Washington for the next two years.
“The rate of interest may go up, but tuition is going to be kept down.” Wilbur said. “In the long run they may save some money because of that, compared to students in other states where tuition keeps going up.”
Because most students won’t be taking out new loans until college starts this fall, Congress does have time to act in the next month or so before the financial hit is fully felt.