A college education should not be only for the lucky few, but should be an opportunity for all those with skill and determination. Given the opportunity to better themselves through higher education, individuals can provide for their families and strengthen our country. A college degree is also becoming essential to a growing number of jobs in the new 21st-century economy.
But with college tuition growing rapidly, the doors of opportunity are closing on more of today's students. Indeed, tuition rates at four-year colleges and universities have risen over 32 percent in the last decade as a direct result of falling support for higher education by states. This is driving many young Americans to assume historically high levels of student debt. Student loan debt now exceeds credit card debt in the U.S., creating a large burden on graduates.
The problem will only get worse if Congress does not act soon. On July 1, 2013, interest rates on subsidized Stafford students will double, from 3.4 percent to 6.8 percent. Congress extended the 3.4 percent rate last year through the 2012-13 academic year, but it is now scheduled to double to 6.8 percent on July 1st. This will increase costs for more than 7 million students. Every year that Congress doesn't act to block this doubling will cost these students $1,000.
Students and families cannot wait any longer to know how much they will owe on their student loans in the coming academic year. The House Republican leadership must quickly bring up legislation to prevent the doubling of these student loan rates.
With the job market still recovering and interest rates for banks at historic lows, we should not be asking students with the greatest need to be burdened by higher loan costs.
Democrats in Congress overhauled the college student loan program — ending a flawed system that gave away billions in federal subsidies to private banks that simply acted as middle-men and putting those taxpayer dollars directly in the hands of students to pay for their education.
There is no good reason to allow rates for students to double at this time. Now we need to take the next step and prevent this looming rate hike on July 1st. Further, Congress should restore fair treatment to Americans in severe financial distress whose debts include private student loans.
Unlike federally backed student loans, many private loans have variable interest rates with no caps. Nor do they have the same deferments or other critical consumer protections associated with federal student loans. This may make it difficult for recent graduates who are looking for jobs or are entering the workforce in entry-level positions to keep their loans in good standing.
Before 2005, private student loans issued by for-profit lenders were appropriately treated like credit card debt and other similar types of unsecured consumer debt in bankruptcy. Then, without any hearings, Congress changed the bankruptcy law to make private student loans made by private, for-profit lenders extremely difficult to discharge in bankruptcy.
Congress should act immediately to pass my bill, H.R. 532, the Private Student Loan Fairness Act, to give Americans the same protections on private student loans that they had just a few short years ago.
Student loans should be an investment that pays off — and can be reasonably paid off. Unlike Pell Grants, which provide a vital benefit to low-income families and students, student loans also benefit many middle-class families who need our support. Failing to pass these pieces of legislation will make it harder for smart, hard-working Americans to join and stay in the middle class.
Making college more affordable is vital to fostering America's economic competitiveness. Business leaders know it is vital for many young Americans to be educated beyond high school. If more of today's students cannot afford college, businesses will not have the workers with the education and training they need to keep our economy competitive and dynamic far into the future.
Making college more affordable and ensuring that recent graduates will not be unduly burdened by student loans are keys to America's economic future. Let's stop the interest rate hike, allow private student loans to be discharged in bankruptcy, and ensure that reasonable financial aid opportunities are available to current and future students.
U.S. representative Steve Cohen (D-Memphis) represents the 9th Congressional District of Tennessee.