Fresno Democratic Rep. Jim Costa and other members of California's congressional delegation are calling on Congress to take swift action to reset student loan interest rates to 3.4%.
Costa, who spoke Friday to news media in downtown Fresno while surrounded by students from Central Valley universities and community colleges, said lowering rates that spiked to 6.8% in early July is critical for low-income students looking to get college degrees.
"We cannot keep setting our students up for these interest loan cliffs every year," he said. "Congress must act and we must act sooner rather than later."
In May, the House on a Republican-led vote approved a bill that links subsidized Stafford loan rates, which account for roughly 25% of all direct federal borrowing, to financial markets.
Rep. Devin Nunes, R-Tulare, supported that measure, which included an 8.5% cap. But talks stalled in the Senate before a July 1 deadline on a plan to prevent the rates from doubling to 6.8%.
Senators have since failed to come up with a solution. A proposal flopped Thursday after lawmakers learned it could cost $22 billion over the next decade.
"Rising student indebtedness is a major problem," Nunes said in a statement Friday. "But it's easy for politicians to demand simple solutions that ignore our fiscal reality … Any politician who proposes an easy fix to the problem without explaining how the government can afford it is not being straight with the American people."
Michael Ybarra, a 20-year-old Fresno City College graduate headed to the University of California at Berkeley this fall, urged lawmakers at Friday's news conference to reach a compromise before school resumes.
Ybarra said he has borrowed about $7,000 over the past two years. He said he plans to take out an additional $15,000 in loans to pay his tuition at UC Berkeley.
"I come from a working-class family and rely heavily on financial aid as well as student loans," he said. "I'm really concerned with the debt; not only for the families, but the students, that the interest rate is very large."
Costa's call to action comes just a day after another California lawmaker asked federal officials to investigate so-called "loan relief" companies that charge steep fees for student loan-repayment services.
Sen. Barbara Boxer, D-Calif., signed a letter with 22 other senators addressed to U.S. Secretary of Education Arne Duncan and Edith Ramirez, chair of the Federal Trade Commission, calling on them to probe businesses they say prey on students looking to consolidate or pay back loans.
The letter refers to a recently released study from the nonprofit National Consumer Law Center that says borrowers are being deceived by companies that don't disclose fees and give out inaccurate information about financial repayment plans.
"We owe it to student loan borrowers — and to taxpayers — to ensure that unscrupulous businesses are not taking advantage of the student debt crisis," the letter reads. "Federal student loan repayment should be manageable and free from misinformation."
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