When the U.S. Senate approved the student loan rate compromise last week, 18 senators voted against the deal.
One of the senators voting against the deal: U.S. Sen. Kirsten Gillibrand, D-N.Y.
Following her press conference Monday in Syracuse, I asked Sen. Gillibrand why she opposed the agreement.
"I did not think it was the right approach, largely because it locked the interest rate that students are going to pay to market rates. And market rates, as you know, could go up very quickly," she said. "They could go up to 7, 8, 9, 10 percent. For a student to have to be paying 8, 9, 10 percent on their student loans means they will be laden with debt that they cannot afford. They may have to postpone having children, buying a home, starting a business."
Gillibrand continued: "Frankly, I don't think the U.S. government should be making money off the backs of our students. I think it is a bad framework. It is the wrong result. Even though the proposal was beneficial in that it locked in a lower rate for the next two years, I fear that there's no way to get the Republicans back to the table because now they have what they want. They want it set at market rates and I do not think they should be set at market rates."
Gillibrand also touted legislation she introduced in May — the Federal Student Loan Refinancing Act — that would allow students to refinance their loans.
"You can refinance your mortgage. You can refinance your business loans. But you can't refinance your student loans? It's absurd," she said. "So, my bill is very simple. Any student should be able to refinance at 4 percent because that's the going rate today. It should be for any student loan currently held. I think that's what's fair and right."
While Gillibrand opposes the bill, other Democrats support it. After the Senate passed the student loan agreement last week, President Barack Obama praised senators for approving the deal.
"This compromise is a major victory for our nation's students. It meets the key principles I laid out from the start: it locks in low rates next year, and it doesn't overcharge students to pay down the deficit," Obama said in a statement. "I urge the House to pass this bill so that I can sign it into law right away, and I hope both parties build on this progress by taking even more steps to bring down soaring costs and keep a good education — a cornerstone of what it means to be middle class — within reach for working families."
The House of Representatives could vote on the student loan compromise as early as Wednesday. U.S. Rep. Dan Maffei, D-Syracuse, said in a statement last week that he supports the agreement.
Under the agreement, federal student loan rates would be tied to the bond market. While the market will determine the rates, rates will be capped for undergraduates, graduate students and parents. For undergraduates, the rate cap will be 8.25 percent. The cap for graduates will be 9.5 percent. Rates for parents receiving federal PLUS loans will be capped at 10.5 percent.
This year, the interest rate for undergraduates will be 3.86 percent. For graduates, the rate will be 5.41 percent. GradPLUS and Parent PLUS borrowers will have a rate of 6.41 percent.
