, Newburyport, MA

Local News

July 4, 2013

Tierney awash in student loan debate


Part of the problem, Tierney said, are budget rules in the House that say revenue reductions need to be made up.

“Ostensibly, if you don’t let it go to 6.8 percent, you are going to reduce revenue,” Tierney said.

However, besides that “budget gimmickry,” Tierney said the federal government is not a business and should not be profiting off student loans. He cited a figure of $51 billion that the federal government reaped off student loans last year.

Democrats would like to resolve the issue of student loan rates once and for all, Tierney said. In May, according to a Tierney press release, Sen. Jack Reed, D-R.I., Sen. Dick Durbin, D-Ill., Tierney and others announced the Responsible Student Loan Solution Act of 2013.

Under this bill, student rates would factor in defaults and administration costs, and would be pegged to the rate of the 91-day Treasury bill, which is presently below 1 percent. The Republicans’ plan would tie new student loans to the 10-year Treasury bill, which carries a higher rate.

As rates rise over time, Democrats would cap rates at a maximum of 6.8 percent for subsidized Stafford loans and 8.25 percent for unsubsidized Stafford loans, according to the congressmen. It would also allow those with high interest fixed-rate student loans, about 37 million people, to refinance them under this plan.

In the short term, Tierney said there are proposals to roll back the subsidized Stafford rate to 3.4 percent. Democrats on the committee are trying a parliamentary procedure to move a bill by writing a letter to committee Chairman John Kline, R-Minn., said Tierney, one of the letter’s co-signers. Kline has three days to act, or Democrats can force a hearing with the support of three committee Republicans.

“I think it’s really frustrating that Congress can’t come to an agreement on the basic things that everyone agrees with,” Tierney said.

“In this age of volatile politics, it is amazing that government has come to this,” said retiring North Shore Community College President Wayne Burton.

North Shore Community College students don’t borrow that much, but a significant number do have subsidized Stafford loans. In a twist, the doubling of the student loan rates may actually be beneficial to community colleges, as students flock to less expensive schools when education becomes more expensive to finance.

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