Two of the region’s Democratic lawmakers are trying to force a vote that could delay a rate hike on federally subsidized student loans.
Interest rates on new Stafford loans will double from 3.4 percent to 6.8 percent unless Congress can agree on a fix by the July 1 deadline.
Rep. Ron Kind of La Crosse and Tim Walz of Mankato, Minn., have signed a petition to force a vote on a bill that would keep the current rate on Stafford loans for two years, giving Congress time to agree on a solution.
“We’re putting these students in such a deep fiscal hole,” Kind said. “I’m afraid it’s going to hurt economic growth.”
About 68 percent of University of Wisconsin-La Crosse graduates had loan debt in 2011, owing an average of nearly $17,000, according to a UW report.
Rob Waara just joined those ranks. The 20-year-old UW-L student just took out his first loan to pay for summer classes.
When he graduates, he’ll have to quickly find work to make payments, and the thought of a rate hike is worrisome, Waara said.
“Obviously, it’s really tough for a lot of people,” Waara said.
Keeping rates low is an important part of keeping higher education affordable, UW-L Chancellor Joe Gow said.
Student loan debt nationally has reached $1.1 trillion, according to the Consumer Financial Protection Bureau, passing the country’s combined credit card debt, and second only to mortgages.
Stafford loans are a widely used resource for middle class and low-income students vying for a college degree.
“The federal government provides assistance with student loans, and that makes it truly possible for everyone to get a college education,” Gow said.
Lawmakers scrambled to reach a last-minute agreement on the Stafford loans last year, but only delayed the pending increase.
The petition signed by Kind and Walz would offer an alternative to a Republican-backed proposal that passed the House last month.
The plan links student loan interest to interest rates on U.S. Treasury notes.
Such a proposal is worse than doing nothing, casting interest rates into uncertainty, and potentially costing students more than just letting the rates double, both Walz and Kind said.
The Republican plan would mean a smaller increase next year — to about 4.5 percent — but rates on Treasury notes are likely to continue rising, according to the non-partisan Congressional Research Service.
The interest rate on a Stafford loan is projected to pass 6.8 percent by 2017, eventually climbing as high as 7.7 percent.
The plan has another flaw, Walz said. It won’t pass muster outside the House and has no chance of becoming law.
“You can scream about that or whatever you want, but that’s how democracy works,” Walz said.
The petition for an alternative has about 200 signatures but needs 218 to force a vote on the House floor.
That means finding Republicans willing to dissent from party leadership, Kind said.
Meanwhile, students await the approach of yet another metaphorical cliff.
“They’re sick of cliffs,” Walz said. “Let’s just give certainty for the next two years and come back and find a solution.”