The U.S. House of Representatives passed a bill Wednesday that would cut interest rates for subsidized Stafford loans in half over five years.
The College Student Relief Act, which is still pending Senate approval, passed by a steep margin of 356-71 almost exactly a year after a Republican-dominated Congress voted to give federal student aid the largest cut in history.
“Everybody’s been saying ‘We went to help higher education,’” said U.S. Rep. Peter DeFazio, D-Ore. “This is a chance to fix what they did.”
Oregon students would receive the second greatest savings in the nation, according to a report by the Oregon Student Public Interest Research Group.
Oregon Student Association spokeswoman Courtney Sproule said this is largely a reflection of the huge amount of debt held by Oregon students. Sproule attributed increased student debt to a decline in state funding.
“The disinvestment we have seen over the past decade … has caused tuition to sky rocket and with it, debt levels,” she said.
If the legislation is signed into law, interest rates will be lowered from 6.8 to 3.4 percent over five years. Students would start benefiting from a lowered interest rate of 6.12 percent starting July 1, 2007.
According to the OSPIRG report, the average University student taking out a Stafford loan would save $4,560 over the course of a 15-year repayment period, after the legislation takes full effect in 2011. A student starting school in 2007 would save about $2,300.
ASUO State Affairs Coordinator Emily McLain said that burdensome student debt could potentially drive students away from careers in public service, which tend not to pay as well as careers in the private sector.
“A lot of students are determining what career path they follow according to how much debt they have, which in turn makes students turn away from the public sector,” she said. “There are so many different people that we’re not seeing reach their full potential because the truth of the matter is that when (they’re) in debt, they can’t pursue careers that they might feel drawn to.”
DeFazio said the tone at the capitol indicated Congress was moving toward greater investment in higher education, namely increasing the maximum Pell Grant amount and increasing the number of direct federal student loans, which are loans that do not use private banking institutions.
“I expect a strong push to minimally institute that law, which would double the number of students who receive direct student loans,” he said. “Personally, I would do away with all bank subsidized loans.”
He added that “there’s a really good chance” that the bill would pass in the Senate, which is developing a similar bill.
Sproule said she hoped that the Oregon legislature would follow suit in increasing the state’s investment in higher education.
“It’s a really great first step that could set the tone for some really great steps,” she said. “We need Oregon legislature to follow this lead and reinvest in post secondary education.”
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