WASHINGTON — As a member of the House Education and the Workforce Committee, Congressman John Tierney stands amid the tussle on Capitol Hill regarding a doubling of the interest rate on federally subsidized Stafford loans that could impact the finances of 7.4 million low-income students.
With congressional inaction, the rate for these loans for students headed to college this fall shot up from 3.4 percent to 6.8 percent Monday.
Tierney said he is not only concerned about the short-term impact of the rate hike — Congress could reverse it in the coming weeks — but a long-term plan to make student loans as affordable as possible. There are plans on both sides of the aisle to revamp the federal student loan system, but Tierney and Democrats say Republican plans would raise student loan rates more than Democrats’ plans, and more than the 6.8 percent rate.
If Congress acts quickly and passes a stop-gap measure to keep the subsidized Stafford loans at 3.4 percent, students would not have to pay double the interest rate, said Tierney, the Salem Democrat whose 6th Congressional District includes all of Cape Ann.
The future of federal student loans — how they are structured, whether they are variable or fixed, at what interest rate they are capped, and whether they are tied to certain interest rates — is a complicated issue.
First-term Massachusetts U.S. Sen. Elizabeth Warren, for instance, had a plan that drew headlines because it would lower the rate to 0.75 percent for one year. It’s the same discount rate at which the government lends money to banks.
While Warren’s plan has been criticized, Tierney said: “If it’s good enough for the Wall Street banks, it’s good enough for the students.”
According to Tierney, rates for subsidized Stafford student loans were gradually lowered to 3.4 percent from 2007 to 2011. These rates expired, but Congress extended the low rates temporarily.