Student Loans... Today's the Day

Last week we were dismayed how Obama pressured Senate Democrats into a putrid deal with Republicans (and through them, Wall Street) on the student loan debacle. Today the Senate is scheduled to vote on the bill, which benefits students in the short term and crucifies students over time-- a really ugly, shameful compromise. Blue America is standing behind the position articulated by MoveOn regarding the bill: "Congress' deal on student loan interest rates is an unacceptable plan to sell out and profit off the backs of students. This deal jeopardizes the long term well being of our students, our families, and our country’s economy by making a college level education inaccessible for many, while locking those who do go to college into even more years of debt. We need legislation that protects students and promotes education and entrepreneurship, not a plan that raises rates and puts students at the mercy of the market."

Monday, Massachusetts' two senators, Elizabeth Warren and Ed Markey, both came out swinging-- against the horrendous and unfair deal, which will eventually force student loan rates beyond 10%. Warren: "I can’t support a proposal that squeezes even more profits out of our kids." Markey: "We need to do more to make college affordable so that every student who dreams of higher education isn’t saddled with higher loan rates. I will oppose plans that substantially increase the rates students pay now and in the future. Last year, the federal government made $51 billion from student loans. That’s just wrong. We should not make money off of the debt families incur in their efforts to help their children succeed."

Under the bill, undergraduates would see rates of 3.86 percent this year, but those rates could go as high as 8.25 percent in future years. Rates for graduate students would be 5.41 percent this year with a 9.5 percent cap. Rates for PLUS loans, given to parents and some graduate students, would be 6.41 percent with a cap of 10.5 percent. (Currently, the rate for undergraduate and graduate students is 6.8 percent, and for PLUS loans is 7.9 percent.)

...Warren said the current bill is not a compromise, but mirrors the Republican view. She compared the plan to credit card and mortgage companies offering “teaser rates,” then increasing them to make a profit.

“With student loan rates now at 6.8 percent, if Congress does nothing, the government will make $184 billion in profits over the next 10 years. Under the new proposal, the government will make even more money,” Warren said. “I am opposed to making these profits off the backs of our students. I think that’s fundamentally wrong.”

Warren said the formula is “pitting our kids against each other” since students who get lower rates now would have those breaks paid for by future students.

Warren and U.S. Sen. Jack Reed, a Rhode Island Democrat, plan to introduce an amendment that would lower the caps to the current rates of 6.8 percent and 7.9 percent. Under predictions provided by Warren’s office, undergraduate loans would exceed those rates in 2017 under the compromise bill; loans to graduate students and parents would exceed them in 2015. Republicans are unlikely to support the amendment, because it would increase the cost of the bill. A Markey spokesman said the Massachusetts senator will support the amendment.

Warren said she would be fine with the rate moving with the market, if the cap were 6.8 percent. “That’s the only way to ensure no student ends up paying more than they would if Congress does nothing,” Warren said.

Warren said she has spoken with Democratic President Barack Obama, who supports the bill. She described it as a “healthy conversation” and said Democrats agree on the need to get student costs down, but differ on strategy. “The proposal on the table is the Republican proposal to keep the profits high off the backs of our students,” Warren said. “I think that’s the wrong approach and right now is the place to stand and fight over that, to say no, we’re going to bring down at least some of the profits we make off the backs of our students.”

Warren said she could only support a bill that includes some reduction in government profits. “If they reduce profits some, I’d be there. That’s a true compromise,” she said.

Tuesday morning Warren sent her followers another statement of non-support for this travesty.

I’ve spent years fighting back against credit card companies that put out zero-interest teaser rate cards, planning to jack up the price later and make all their profits in the fine print.

I also fought back against teaser rate mortgages that promised low payments in the first few years, but then shot up to rates that pushed millions of families into foreclosure.

So it’s shocking to me that the United States Senate would offer its own teaser rate for our student loan system-- a system that is scheduled to make more than $184 billion in profits over the next ten years. That's not the business the United States government should be in.

We had a majority in the Senate to keep student interest rates low, but because of Republican filibusters, the interest rate on federally subsidized student loans jumped from 3.4% to 6.8% on July 1st. Instead of restoring that 3.4% rate, a new so-called "compromise" plan on the table raises the interest rate on those loans this year to 3.86% for undergraduate students, and 5.41% for graduate students in 2013.

And then it gets worse. The plan is set up to collect higher interest rates in future years. After just 24 months, the rate jumps above 6.8% for graduate students. Within a few years, rates for all loans will be higher than if Congress does nothing-- and some could climb as high as 10.5%. Even worse, with the federal government already making billions in profits off these programs, the "compromise" plan is set up to actually increase those profits by hundreds of millions of dollars more.

I can't support a proposal that squeezes even more profits out of our kids, while millionaires and billionaires still don't pay their fair share. This is a bad deal.

...In the end, this is a simple math problem.

If Republicans insist that we continue to make the same $184 billion in profit off of the student loan program, that just means that students in future years will have to pay higher rates to make up the difference.

I don't believe in pitting our kids against each other. In fact, I think this whole system stinks.

We should not go along with any plan that demands that our students continue to produce huge profits for our government. Making billions and billions in profits off the backs of students is obscene.

Senator Jack Reed's amendment is the only plan on the table right now that guarantees student loan interest rates won't skyrocket above their current levels. We need to pass this amendment for our kids and grandkids.

The Obama Administration's response confirms again to me that I made the correct decision last November by not voting for his reelection. The White House sent a packet of propaganda to the media today calling the "compromise" a good deal for students. It isn't... although people not paying any attention might think this-- from the White House-- is a good idea: "Protections Against High Rates: The plan caps how high student loan interest rates can rise-- a key provision pushed by Senate Democrats-- giving students protection against future economic conditions. Undergraduate loans are capped at 8.25 percent, graduate loans at 9.5 percent, and PLUS loans at 10.5 percent."

The Obama Administration has strayed way into Bush territory with this one. Senator Bernie Sanders (I-VT): "The White House is being disingenuous and is trying to sweep under the rug big increases in interest rates for students and parents in the near future. Because college costs are out of control and interest rates are rising, students are leaving college deep in debt or in some cases choosing not to continue their education because they cannot afford it."

This morning's NY Times endorsed the progressive perspective over the one Obama, the Wall Street banksters and the Republicans are pushing. Debate started at noon today and late this afternoon the Senate will vote on the Reed/Warren amendment and on another good one-- Bernie Sanders' proposal that sunsets the bill after the good years when the really high interest rates kick in.

The government should not be making money off the backs of struggling student borrowers. In the long term, the loan program needs to be restructured so that the loans are closely linked to the government’s actual cost of borrowing, which could reduce rates for students.

A Senate compromise bill that is supposed to address the harmful rate increase falls well short. The bill, supported by the White House, would temporarily lower interest rates, while raising rates in future years to make up for lost federal revenue. (Under interest rate caps included in the bill, rates on undergraduate loans in future years could rise as high as 8.25 percent.) Ms. Warren got it exactly right when she said the bill pits students against one another, requiring future college students to pay for the financial break enjoyed by students who precede them. “I think this whole system stinks,” she said, summing it up.

The Senate bill should pass only if it includes a provision, offered by Ms. Warren and Senator Jack Reed, a Democrat of Rhode Island, that would cap most loans at the rate of 6.8 percent. If Republicans resist that, the Senate should leave the loan rate exactly where it is. Congress should not make matters worse than they already are.

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UPDATE: Who Voted To Screw Students?

The Reed-Warren amendment was defeated 46-53, Harkin voting with every Republican and the 5 most conservative, anti-family Senate Dems-- Tom Carper (DE), Joe Donnelly (IN), Tim Kaine (VA), Joe Manchin (WV), and Mark Pryor (AR)-- plus Independent Angus King (ME). Sanders' amendment was also defeated, 34-65... really sad to see 17 Democrats voting so badly (including Feinstein, Durbin, Casey and Murray). Really sick! The overall shit-sandwich bill Obama served up then passed 81-18.

After the vote, Senator Warren sent out this brief statement, while Obama and his Wall Street pals celebrated: "Today's vote is over, but our fight to make college more affordable and a better deal for our students continues. I'm in this fight for the long haul-- we must invest in our kids, bring down the skyrocketing costs of college and tackle the more than trillion dollars in student loan debt that is crushing middle class families and threatening our economy. I am eager to work with the President and my colleagues to attack these problems head-on and find solutions that will provide a real shot at an education for all of our children."