On July 1 of this year, Congress' partisan gridlock and inability to come together for the sake of the American people was on full display when it allowed the rates for subsidized Stafford loans for college students to double from 3.4 percent to 6.8 percent without any legislative remedy.
This comes at a time when tuition rates are rising uncontrollably. In fact, over the last 10 years tuition rates have far outpaced inflation. During that time the economy has experienced an average inflation rate of 2.5 percent while the average annual tuition increase at a four-year public university has been double that at 5.2 percent. College seniors today are graduating with an average student loan of $27,000.
On May 23, I supported H.R. 1911, the Bipartisan Student Loan Certainty Act of 2013, when it was passed in the House. H.R. 1911 added stability to educational loans in a fiscally responsible way by fixing the rate to the 10-year Treasury note. However, once the bill passed the House and was sent over to the Senate, certain senators on the other side of the aisle made unreasonable demands that not only went contrary to the president's stated objectives, but were fiscally irresponsible.
After months of partisan wrangling within the Senate, last week the House of Representatives passed, with my support, the Senate amendment to H.R. 1911. I am pleased the Senate agreed with our approach that will give students the clarity and security they need while balancing the duty of Congress to be good stewards of taxpayer money. The final legislation, supported by the majority of the House and Senate, moves all new student loans (except Perkins loans) to a market-based interest rate while allowing interest rates to be reset once a year. Interest rates would be set using the following formulas:
Undergraduate Stafford Loans (both subsidized and unsubsidized) will be based on the 10-year Treasury note (which on August 1 was 2.74 percent) plus 2.05 percent, capped at 8.25 percent. Graduate unsubsidized Stafford loans will be based on the 10-year Treasury note plus 3.6 percent, capped at 9.5 percent, and PLUS loans (both parent and graduate student) will be based on 10-year Treasury note plus 4.6 percent, capped at 10.5 percent. These are commonsense formulas will provide students with affordable interest rates while maintaining the financial integrity of the federal student loan structure.
As I alluded to earlier, this plan is similar to one supported by the president in his budget proposal. He agrees with the House that it is imperative Congress remove itself from the annual debate on interest rates so students can focus on getting an education rather than worrying about politicians in Washington, D.C. I hope President Obama acts quickly and approves the proposal that aids our students struggling in this economy.
Congress has been plagued with gridlock, so I am very pleased that Republicans and Democrats were able to come together to do something good for students while at the same time securing our future economic growth. However, we need to do more.
When we subsidize student loan interest rates, we are investing in our future by sending highly trained and productive citizens out into the workforce and entrusting them with the levers of our economy. If we want to ensure a vibrant economic future, I hope that Republicans and Democrats can come together with the same spirit of bipartisanship that successfully addressed the loan rates and finally tackle the other national problems like debt, deficits, as well as entitlement and tax reform in the same cooperative manner.
Republican Mike Coffman is the U.S. Representative for Colorado's 6th District. He is a Marine Corps combat veteran and has a combined 21 years of military experience between the Army, the Army Reserve, the Marine Corps and the Marine Corps Reserve.