As lawmakers struggle to reach a deal on student loan interest rates, Keuka College President Dr. Jorge L. Díaz-Herrera believes one already exists.
Díaz-Herrera endorsed the Bank on Student Loan Fairness Act, introduced in Congress by Sen. Elizabeth Warren (D-Mass.) and U.S. Rep John Tierney (D-Mass.).
“It allows students to borrow funds at the same low rate (.75 percent) that banks borrow from the Federal Reserve for a year,” said the president.
Proponents of the proposal said it would also provide a window for Congress to find a fair, long- term solution on student loan interest rates.
The rate jumped from 3.4 to 6.8 percent when Congress failed to act by the July 1 deadline.
Various proposals have come forward since. One bipartisan plan would have tied student loan interest rates to the variable rates of the 10-year Treasury bond. Undergraduate students would have been charged 3.6 percent and graduate students 5.21 percent. That proposal would cap interest rates at 8.25 percent for undergraduates and 9.25 percent for graduate students.
“I am not convinced that kind of proposal is fair, given the variability of the Treasury bond rate and the high cap rates,” said Díaz-Herrera. “Even a minimal interest rate hike would be problematic because, as we’ve seen, as income inequality among Americans has widened so, too, has the education gap. Students from wealthy families are seven times as likely to have earned a bachelor’s degree by age 24 than those from poor families.”
The president said that kind of data led Keuka College to join the Yes We Must Coalition, a non-profit organization of 32 small, private, non-profit colleges and universities that work to help low-income, first generation, and minority students receive a higher education.
“Access to higher education isn’t the only thing that will suffer if students are forced to pay higher rates,” he explained. “If the student loan rate remains at 6.8 percent, a student who took out a $23,000 loan can expect to pay an additional $3,000 over 10 years. Student loan debt already exceeds $1 trillion, which is greater that the total American credit card debt. More debt poses a risk to household spending, especially among the middle class, and threatens our economic recovery.”