Senator Harry Reid

522 Hart Senate Office Building

Washington, DC 20510

Senator Mitch McConnell

317 Russell Senate Office Building

Washington, DC 20510

June 21, 2013

Student loan reform: A bad deal that is permanent is worse for student borrowers than no deal at all

Dear Majority Leader Reid and Minority Leader McConnell,

Comprehensive student loan reform must result in lower student debt levels than what borrowers would carry as a result of current policy; that is, student loan borrowers must be better off than they would be if no action is taken and the subsidized Stafford student loan rate doubles on July 1 to 6.8 percent.

Unless Congress takes action, the interest rate on subsidized Stafford student loans will double on July 1 from 3.4 percent to 6.8 percent, increasing college costs for over 7 million students, by $1,000 per student, per loan.

Considering the enormity of the student debt problem, and the significant number of students and borrowers impacted, it is clear that we need a comprehensive overhaul of federal student loan policy. However, with just 10 days left until the deadline, it is unlikely that Congress can come to an agreement that is better for student loan borrowers than if rates doubled to 6.8 percent.

Therefore, we the undersigned student, consumer, education and youth groups again urge you to adopt the Student Loan Affordability Act, S. 953, put forth by Senators Harkin (D-IA) and Reed (D-RI), which creates a workable solution to keep student loan interest rates low until 2015 while Congress seeks to reauthorize the Higher Education Act and reach a comprehensive solution that is good for students.

Not only is extending the low rate the right thing to do right now for low- and moderate-income families that overwhelmingly receive Federal Subsidized Stafford student loans, but it demonstrates a political commitment to moving student loan and student aid policy toward affordability and equity.

That said,any comprehensive student loan reform now and in the future must meet all of the conditions below in order to qualify as a good deal for student loan borrowers:

1)Comprehensive student loan reform must result in lower student debt levels than what they would carry as a result of current policy; that is, student loan borrowers must be better off than they would be if no action is taken and the subsidized Stafford student loan rate doubles on July 1 to 6.8 percent. This principle applies to student borrowers now and in the future.

2) Under the fixed rate system in place currently, student loan borrowers are insulated from high interest rate environments. Such protection should continue, the form of a meaningful cap, if the rate is pegged to the market in any system.

3) Comprehensive student loan reform cannot be paid for by raiding other student aid programs, as the goal of federal grant aid and student loan programs working together is to keep college within reach for students from low and moderate income backgrounds,

4) The cost of borrowing in the form of fees and interest rates must be tied to the actual costs of the student loan program, not arbitrarily set, based on goals of ‘budget neutrality’ or to generate additional revenue for government coffers. Already, current rates are inappropriate and unjustifiable both to students as well as to taxpayers more broadly.

5)As a corollary to the above principle, revenue (both old revenue and new revenue) coming from borrower interest payments and other fees charged as a result of comprehensive student loan reform must not be used for purposes of deficit reduction.

If these principles cannot be met, then we believe that NO deal is better than a permanent BAD deal.We urge you to avoid negotiating a deal for the sake of a deal, rather than truly considering the long term policy impacts of the various comprehensive plans that are being considered.

Sincerely,

All Education Matters

American Federation of School Administrators, AFL-CIO

American Federation of State, County, and Municipal Employees

American Federation of Teachers

Asian Pacific American Labor Alliance

Department for Professional Employees, AFL-CIO

Education Trust

Generational Alliance

International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers

International Brotherhood of Boilermakers

Metal Trades Department, AFL-CIO

National Education Association

National Federation of Federal Employees

Our Time

Rock the Vote

Student Debt Crisis

The Institute for College Access and Success

United States Public Interest Research Group

United States Student Association

Young Democrats of America

Young Invincibles