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Blumenthal Continues Work On Student Loan Relief Effort

by Christine Stuart | Jul 29, 2013 1:31pm
(6) Comments | Commenting has expired
Posted to: Economics, Education, Jobs

Christine Stuart photo

U.S. Sen. Richard Blumenthal

Student loan debt is hampering economic recovery and delaying attainment of the American dream, a trio of students, two university presidents, and U.S. Sen. Richard Blumenthal said Monday at a Capitol press conference.

Last week, the U.S. Senate passed a bill that will reset interest rates to 3.4 percent for subsidized Stafford loans for students entering college this year, but it also allowed rates to rise as high as 8.25 percent in the future. The rates are tied to a 10-year Treasury note that also adds a percentage to the interest rate based on the type of loan, and it caps how high the loans can go.

Blumenthal voted against the bill, which passed 81-18, because he felt it would “unconscionably raise interest rates on new loans to students.”

The U.S. House is poised to pass a bipartisan compromise, according to news reports, and President Barack Obama said last week that if the House passes the Senate bill he will sign it into law right away.

In the meantime, Blumenthal said he will continue to offer solutions to government-backed student loan programs. He suggested opening up the “Pay As You Earn” program to all graduates, not just those who entered college after 2007. He would also amend the tax code to make the benefits received under that program “non-taxable.” The “Pay As You Earn” program allows students with certain types of loans to lower their monthly payments and have a certain amount of the loan forgiven if they continue to pay it consecutively for 20 years or in 10 years if they go into public service.

For the graduating class of 2011 in Connecticut, 62 percent borrowed to pay tuition. Of those students, their average debt at graduation was $29,380.

“We ought to be investing in students, not profiting off their backs,” Blumenthal said.

The U.S. government is scheduled to earn $51 billion in annual profits off student loans this year. There is more than $1 trillion in student loan debt nationwide.

Christine Stuart photo Eric Bergenn, a graduate of Central Connecticut State University, said the last few years have been a “slow and grueling economic recovery, but it’s only going to recover if we can strengthen our workforce.” He said educational attainment should be part of that equation since it’s an indicator of unemployment.

Sara Schroedl, who is studying to be a pharmacist at the University of St. Joseph after graduating from CCSU, said that instead of going to work in a job she wants, she’s going to have to find a job that helps her pay off her student loans.

“I really don’t see my future in terms of following my dream. I see my future in being able to pay off my loans,” Schroedl said. “I don’t think that’s something I should accept. It’s something we should all work toward eliminating.”

Christine Stuart photo Sam Cheney, a recent Quinnipiac University graduate, said there’s a myth out there that students are attending colleges that are too expensive for them and they shouldn’t have gone. However, the advice given by high school guidance counselors is to “go to the best school you can,” Cheney said.

“Don’t worry about the sticker price” was a common mantra, he added. That means the country is entrusting college students, who are unable to rent a car, with five figures worth of debt. For Cheney, it means he’s paying more in student debt every month than he pays in rent.

“Higher education needs to be an investment this country makes, not simply a decision by individuals to put on debt for themselves and maybe make it after they graduate,” Cheney said.

Elsa Nunez, president of Eastern Connecticut State University, and James Schmotter, president of Western Connecticut State University, also called for reforming the student loan programs.

Currently, 70,000 students in Connecticut are paying student loans.

She said allowing interest rates to double on July 1 to 6.8 percent adds about $5,000 in debt to each student loan and $13 million in debt over the next 10 years. The per-student loan debt has increased 50 percent since 2005, she added. And the gross student loan debt has grown 400 percent this past decade.

Schmotter applauded Blumenthal’s “political courage” and desire to “do the right thing” by voting against the bill. He said the Senate vote last week simply “pushed the problem down the road.”


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(6) Comments

posted by: JamesBronsdon | July 29, 2013  2:26pm

Federal involvement with student loan financing inevitably does a disservice to its purported beneficiaries - much like federal meddling in any number of other areas of our economy where it is entirely unnecessary (e.g., FNMA, FHLMC, ACA).  Subsidizing interest rates - and providing federal loans in the first place - leads to increases in the cost of higher education since colleges and universities can inflate tuition accordingly, and it encourages students to extend themselves when they may not need to for a substantially similar education at lower cost. Blumenthal seems determined to pursue every bankrupt liberal policy to its inevitably disastrous end, results be damned if the votes follow.

posted by: ASTANVET | July 29, 2013  2:42pm

woah woah woah… slow the train down.  “Higher education needs to be an investment this country makes, not simply a decision by individuals to put on debt for themselves and maybe make it after they graduate,”.  Education is an individual decision based on their perceived ability to gain employment based on their individual investment in higher edcation qualifying them in career entry requirements.  Holding society hostage to their desire to get an MBA in 19th century feminist poetry is not the market driven educational model.  It is also presumptuous to believe that you can only survive in today’s economy with a bachelor’s degree.  There is plenty of work for plumbers, electricians, mechanics, trades and craftsmen.  This egalitarian belief that you need to conduct your right of passage by way of college is nonsense.  It is all about the money - the government backs student loans to make them more available, colleges and universities run to make (non market bearing programs) to expand the educational infrastructure, schools make money, government makes money - students are cohersed into making risky financial and life decisions based on the availability of easy money without thinking through the consequences of the kind of education they will pursue.  Miss Schrodl can cry me a river about not being able to follow her dream job but having to -perish the thought - pay her bills!

posted by: Art Vandelay | July 29, 2013  9:30pm

Government tuition subsidies equals college graduates beholden to the Government for the rest of their lives.

posted by: middleoftheroad | July 29, 2013  11:31pm

Maybe James, but my student loan payment jumped to $1K per month because of the interest rate issue.  I might agree with you philosophically, but it doesn’t change the fact that many of us are now getting smacked by the jump in rates.  I bet a lot of people are struggling to make ends meet.  Why penalize people who chose to go the route—the only route for many—of taking loans to make a difference in the world?

posted by: dano860 | July 30, 2013  8:28am

Blumenthal voted against the bill, which passed 81-18, because he felt it would “unconscionably raise interest rates on new loans to students.”
M.O.T.R., the proposed rate increases are on future loans. These rate increases are also a reset (.8% higher) to the rates of 2007 prior to the College Cost Reduction and Access Act.
(The) College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly originated subsidized Stafford loans for undergraduate students to 6.0% (2008-09), 5.6% (2009-10), 4.5% (2010-11) and 3.4% (2011-12), with a return to 6.8% in 2012-13. These cuts are available only to undergraduate students, not graduate students, and only for subsidized Stafford loans, not unsubsidized Stafford loans. Those loans remain at a fixed rate of 6.8%. (WWW.finaid.com)

posted by: JamesBronsdon | July 30, 2013  5:42pm

middle, I struggled to make ends meet for the 10 or 12 years it took to pay back college and law school loans. I imagine it is a struggle for most of us. I’m not sure what is the right thing to do now for those of you who are whipsawed by the increase in loan rates and the lousy economy that you live in. I can certainly empathize. But, long term, I think we have to wean ourselves off all these federal interventionist programs, whether it’s student loans, or subsidization of the housing market via FNMA, or propping up agriculture with programs not to plant crops, or flood insurance, and I can go on and on. They distort the true cost of things and bring unintended and unwanted consequences.