By Aaron Blevins, 7/12/2012
At the beginning of the month, President Barack Obama signed a bill that continued an interest rate reduction for student loans that was set to expire, preventing the current rate of 3.4 percent from doubling.
While the legislation is likely a welcome reprieve for more than 570,000 Californians with student loans, the issue is expected to resurface next summer, when the bill will again be set to expire.
“The last thing [Congress] is thinking about is what’s a year away,” Congresswoman Karen Bass (D-California) said. “And I think that’s too bad.”
She said it is a “travesty” that recent college graduates are tasked with repaying what would amount to a mortgage 20 years ago. However, Bass said the continuation of the interest rate reduction bill was desperately needed. According to information supplied by the White House, more than 7 million students saved an average of $1,000 in debt as a result of Congress’ action.
“I think it could’ve sent people into bankruptcy,” Bass said, adding that she believes the rates should have been reduced permanently.
Though student loan assistance is helpful, it doesn’t stop annual tuition increases from continuously burdening future generations. According to various sources, tuition rates increase about twice as much as the country’s inflation figures. Bass said tuition increases are a “terrible problem,” but legislators are not likely to confront the issue in the near future.
“In all honesty, I don’t think this Congress will address it,” she said.
Bass, though, has introduced the Graduate Success Act, which seeks to support college graduates by suspending interest during periods of unemployment. Currently, student loan borrowers can temporarily postpone their payments on federal student loans, but the interest can continue to accumulate.
The bill would extend interest-free deferments to those with unsubsidized student loans for up to three years. The legislation could affect as many as 13 million unemployed Americans with outstanding student loan payments, according to information from Bass’ office. It was introduced at the beginning of June and has been referred to the House’s Education & Workforce Committee.