The student media organization of California State University Northridge

Daily Sundial

The student media organization of California State University Northridge

Daily Sundial

The student media organization of California State University Northridge

Daily Sundial

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Decrease in loan rates passes in the House of Representatives

The attempts to lower interest rates on need-based student loans by Democrats have received different reactions from various political groups. To some, it might seem to be a noticeable effort toward making higher education more affordable in the long run. To others, however, it is just another campaigning trick.

The U.S. House of Representatives recently voted on a proposed bill that would reduce the interest rates on federally subsidized student loans from 6.8 percent to 3.4 percent in the span of the next five years. Despite some opposition to the bill, it passed in the House, 356-71, on Jan. 17 of this year. The bill, H.R.5-College Student Relief Act of 2007, was one of the half a dozen campaign promises Democrats made when they gained control of the House and the Senate in last November’s election.

Local congressman Brad Sherman of the 27th District is one Democrat who has been working to accomplish the goal of lowering interest rates, along with other early ideas of the Democratic majority.

The idea of the reduction in interest rates taking place gradually as opposed to immediately makes it seem like a part of everyday politics to some people.

“It should actually change immediately,” said Pedro Cesareo, an academic adviser in the political science department at CSUN. “We should be a country with free education. We shouldn’t be passing any bills or in the first place, charging for anything.”

Calling this measure “just politics,” Cesareo said besides holding different views on the major issues, he does not see much difference between Democrats and Republicans.

“If we can pay for congressmen and senators who have violated (the) law and we are still paying for their pension when they are in jail, we know the money is not coming out of thin air,” he said. “The money is there and education should be free.”

One of the claims that some Republicans made in their resistance to this bill was that instead of decreasing interest rates, which will encourage student loans, grants should be increased. In the party’s “Statement of Administration Policy,” issued on Jan. 16, 2007, the opposition mentions that this measure would be unwise, as it will increase the debt loads on students – a problem that has already been ascending rapidly.

Armenka Khashmanyan, a CSUN financial aid counselor, supports the measure since it will help students in some ways.

“Given the current reality – that is, the Pell Grant program has not seen any change in (a) number of years – we would support free money to the students first, but lower interest rates will help them in repayment of overall loan debt,” she said.

In regard to Republicans’ argument about soaring student debt loads, she said, “We can’t stop students from borrowing student loans. We can take steps to educate students on debt management and their responsibility. Student loans do play a role in making college education affordable.”

Juan Guevara, a finance major at CSUN, said the new bill will help students as well as teach them some kind of financial responsibility, which he said is an important quality to acquire.

“Do really good at school, get a good job and pay back,” he advised to students who take out loans.

Guevara said he sees the government’s self-interest in the passage of the bill by the House.

“On subsidized loans, federal government pays your interest when you are in school,” he said. “They will benefit because they have to pay less. They will lower your payments basically.”

Many other organizations beyond the two political parties are active in the argument over the bill.

The American Association of Collegiate Registrars and Admissions Officers is a non-profit and voluntary professional association that is in support of the bill. It issues guidelines and standards to the higher education officials and ensures the proper advancement of postsecondary education.

Barmak Nassirian, associate executive director of external relations at AACRAO, said he is pleased with the bill and that he does not see it as a purely political ploy.

“They have actually passed the legislation that will automatically reduce the rate to 3.4 percent,” he said. “This legislation will keep this rate. This is not a trick. If someone would have to do anything, they would have to go back affirmatively into the legislation and change it. I just don’t see the criticism coming from (the) other side ? as politically viable.”

The bill will only cover the undergraduate subsidized loans and will not be applied to unsubsidized loans or loans that parents take out to help with their kids’ education.

“The measure of reducing interest rates on subsidized loans is driven by budget constraints,” Nassirian said. “It is a system in which the neediest students receive these loans. Saying that others do not need financial help would be a misnomer. However, they are not quite as needy. Regrettably, the policy could not be extended to them.”

The bill now awaits the Senate’s approval.

Calling the Republicans’ “Statement of Administration Policy” a “couple of steps shy from a veto threat,” Nassirian acknowledged that it is a very strong statement in opposition. He said the chances of the bill’s approval in the Senate are not grim.

“Why would anybody be against helping the students?” he said. “It is not controversial. The high-minded debate is being sent by the loan industry since (the) bill cuts their subsidy to pay for this. PR people and industries are trying to sound like this bill is doomed. In general, most of the negative vibe is coming out of self-interest; the loan industry doesn’t want to leave its fingerprints.”

“The prospects of (the) bill’s enactment are vastly greater than you would believe because of this noise level orchestrated by the loan industry,” he added.

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