There’s been some urgency for Congress to pass a new student loan bill because the previous program expired on July 1. As a result, loan rates doubled from 3.4 percent to 6.8 percent.
Under a compromise bill, student loan interest rates would be tied to 10 year Treasury Bonds and could go as high as 8 percent over a period of several years. Backers of the plan argue it will stabilize interest rates and that’s it’s unlikely that the rates will ever reach the interest cap.
Delaware Democrat Tom Carper said it’s critical to adopt a sustainable financial model for this program.
“Should we let them have that money at below government cost ? When we do that it makes the deficit go up,” said Carper. “And it makes us squeeze even more programs like Head Start and the Title One programs. We’re robbing Peter to pay Paul.”
But Senator Bernie Sanders said the bill was “dangerous” because the Congressional Budget Office projects that rates will hit the cap by 2017. And Sanders said it’s wrong to use this program as a way to help reduce the federal deficit.
“To my mind, making huge profits off of young people and their families who want nothing more than to fulfill the American dream of being able to go to college is obscene,” said Sanders.
Under Sanders' unsuccessful alternative plan, the program would “sunset” in two years to give Congress more time to design a long term approach to this issue. The proposal was co-sponsored by Senator Patrick Leahy.
The overall bill was supported by a majority of Senate Democrats and President Obama. Sanders expressed frustration and bewilderment at this situation.
“The United States Senate today has 54 Democrats. So my question is why with a Democratic President are we looking at legislation which is virtually the same as the legislation passed by an extremely conservative House of Representatives,” said Sanders. “How does that happen?”
Sanders said he’s concerned about how the bill will impact Vermont because college students in the state have one of the highest per capita debt levels in the country.