WASHINGTON, D.C. – Representative Edward J. Markey (D-MA), a senior Democratic member of the House Energy and Commerce Committee, announced his strong support today for the “College Student Relief Act,” H.R. 5.  Designed to make an undergraduate education more accessible, H.R. 5 would cut the interest rates on subsidized student loans in half over the next five years. Though savings will be seen as early as July 2007, when fully phased-in by 2011, the bill would help approximately 5.5 million students each save $4,400.  The bill is poised to pass the House of Representatives this afternoon.

Rep. Markey said, “Education is not only a ladder of opportunity for children, but it is also an investment in our nation’s future.  Passage of this bill is the first step in a new direction for the nation’s skyrocketing education costs.  By cutting the interest rate from 6.8% to 3.4% we are opening new doors of opportunity for qualified students who will set the stage for addressing tomorrow’s security, health and economic concerns.”

The legislation arrives on the heels of a new report issued by the U.S. PIRG’s Higher Education Project. Noting that most Stafford loan borrowers in 2005-2006 came from predominately low—and middle class—income families, the report finds that cutting interest rates on loans will result in significant savings across the country.  

In Massachusetts the average debt accrued at a 4-year institution on a subsidized Stafford loan is $13,994.  The College Student Relief Act would provide Bay State students borrowing in 2007 a savings of $2,310, and a savings of $4,470 for families borrowing in 2011, when the cuts have been completely phased in. 

The College Student Relief Act makes college loans more affordable for students while maintaining fiscal responsibility by offsetting the cost of the legislation by reducing various subsidies to lenders and guaranty agencies in the following ways:

1.      Lowers lender insurance rate from 97% to 95%;
2.      Eliminates “exceptional performance” lender status;
3.      Increases from 0.5% to 1.0% lender origination fees;
4.      Lowers guaranty agency collection fees from 23% to 20% next year and to 16% by 2010;
5.      Increases annual fee on consolidation loans for certain lenders;
6.      Slightly reduces the lender SAP (Special Allowance Payment) rate by 0.1% for certain large lenders – exempting 99% of the banks in the student loan program from the reduction.

“Too often many of our nation’s brightest students are deterred from attending institutions of higher learning due to the sheer amount of debt they are expected to take on. This legislation helps lift the excruciating weight that loans impose on college hopefuls,” Markey concluded.

A copy of the US PIRG Higher Education Project report can be found here: student loans uspirg report.pdf