Toomey SUPPORTS Doubling of Student Loan Interest Rate-to pay the extra $4k, stop drinking Starbucks

[JPZenger]

http://www.mcall.com/news/nationworld/pennsylvania/mc-student-loan-rates-20130611,0,7194062.story

The Repubs and Dems have been battling over competing plans to address student loan interest rates. Many Dems want to extend the current 3.4% interest rate for subsidized Stafford loans for another 2 years. If Congress does not act soon, the rate will automatically double to 6.8% per year. For a student taking out the maximum amount of subsidized Staffords (which is very common), it would mean an additional cost of about $4,000.*

Meanwhile, Senator Toomey has come out to actually SUPPORT the doubling of these interest rates. He opposes all alternatives to reduce rates, even the Republican plan. His spokeswoman says that young people can pay the thousands of dollars of difference in payments if they stop drinking Starbucks.

* Based upon http://www.ticas.org/files/pub/Impact_of_Kline-Foxx_and_C-B-A_Rate_Proposals_on_Cost_of_Borrowing_TICAS.pdf
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The Republican plan that passed the US House would turn every new federal student loan into a variable rate loan. There would be no predictability in payments. A student could take out a new Stafford loan at 4 percent, and that same student loan could increase to a 8.5% rate in a few years. A parent or graduate student PLUS loan could rise to 10.5% under the Republican plan, in a few years.

The President has proposed a market rate interest system that would decrease all federal student and parent loan rates initially, because the federal government is currently borrowing the money at 2%. The federal government is loaning out student loans at 3.4, 5, 6.8 and 7.9%, with the highest rates being for parent PLUS and graduate student PLUS loans. The President's plan would only issue fixed rate loans. In future years, if the costs of the federal government to borrow money increases, then the interest rates would increase at a corresponding level. Many Dems are very concerned that there be a reasonable maximum upset rate.
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Excerpts from the above article:

"Pennsylvania's senators are split on what do to about a key student loan interest rate set to double soon unless Congress intervenes. Sen. Casey backs his party's plan to extend current rates, affecting subsidized Stafford loans, for two years. But Sen. Toomey is opposed to an extension — as well as to his own party's plan, which would tie student loan rates to a variable rate set by the U.S. Treasury.

...Both plans would only save borrowers about "$7 per month or about three or four cups of coffee at Starbucks," (the Toomey spokeswoman) said."

(By the way, the spokeswoman's math only works if you go to college for only one year.)
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http://www.nytimes.com/2013/04/09/education/student-loan-rate-set-to-rise-despite-lack-of-support.html?_r=0
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http://www.uspirg.org/sites/pirg/files/reports/USPIRG_Student_Loans_Issue_Brief.pdf

The above report describes how the federal government is making billions of dollars of profit on the highest interest rate student and parent loans. Particularly, if the Republican plan for variable rate loans would be approved, the feds would be making obscene profits because the feds would be borrowing money at low rates for 10 years, and then charging the young person much higher rates for that same money over the life of the loan. For example, the feds might borrow the money for 2% for 10 years, and then the feds could charge 8.5% for that same money a few years down the road.

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More details on the alternative proposals at:

http://www.insidehighered.com/news/2013/05/10/student-loan-interest-rate-proposals-house-republicans-and-some-senate-democrats

[DetlefK]

1. Better messaging will secure the GOP the youth-vote. Definitely.

[SamKnause]

2. Toomey

I would like to cut Mr. Toomeys pay in half, end his tax payer subsidized health care insurance, cut his benefits package in half and end all perks that he receives.

I would also like to make it mandatory that Mr. Toomey work five days a week, instead of 126 days per year.

[Laelth]

3. Lovely. (sarcasm) n/t

-Laelth