COLUMBIA (AP) - U.S. Sen. Claire McCaskill came to the University of Missouri on Thursday to tout a plan that would drastically cut interest rates on federally subsidized student loans. She left with an earful of comments from debt-ridden Mizzou student leaders who had clearly done their homework and remain worried about their futures.
The Democratic senator met with 16 hand-picked campus leaders to build support for the proposed Bank on Student Loans Fairness Act. The bill, whose sponsors include Sen. Elizabeth Warren (D-Mass.), seeks to reduce the current interest rate of 3.4 percent on subsidized Stafford loans to 0.75 percent for one year until a longer-term fix can be developed.
The Republican-controlled U.S. House voted last week in favor of variable student loan interest rates to avoid an automatic increase to 6.8 percent on July 1. That move would spare students from more sizable rate hikes in the near future but expose their future repayments to the vagaries of the market. President Obama has vowed to veto that measure should it reach his desk.
The McCaskill-backed measure links interest rates on Stafford loans to a short-term rate offered to banks by the Federal Reserve known as the "discount window." While critics of the proposal cite the high default rates of riskier student loans and the more onerous obligations banks face to get such cheap rates, McCaskill emphasized the symbolic importance of linking student loan rates to those enjoyed by Wall Street.
"I certainly understand that there is a difference," she told reporters after the round table discussion. "We might need to add to the proposal some basis points for (loan) administration, and maybe a slight increase in that rate to embrace a default rate that might occur. But the principle is a sound one. If we are making it easy for financial institutions to access capital that belongs to the United States, we ought to try to make it easy for students to access (that same) capital."
Jake Wright, a 32-year-old doctoral student in philosophy, lauded McCaskill for her efforts to make college more affordable to the masses. But he was among several students who questioned the senator's preferred proposal, which would not apply to loans obtained for graduate studies. Wright said he has loan debt of $60,000, and knows other students' whose debt reaches into six figures.
"I wish I could sit here and tell you my student loans are at the upper end of the spectrum," he said. "But they're not. Many of us are just being crushed by this debt."
Junior Camille Hosman described widespread student debt as a toxin that funnels talented students away from public sector careers into fields where higher incomes can help pay off debts sooner, but at considerable costs.
"Student loans aren't seen as an opportunity anymore," she said. "It's less of an opportunity and more of a trap."
McCaskill said she didn't expect Congress to immediately broaden its relief efforts toward post-baccalaureates, but also said elected leaders ignore such concerns at their own peril.
"We can't just ignore the debt burden on graduate students and think that's not going to come back and bite us," she said.
McCaskill's session comes one day before Obama hosts a similar discussion with students at the White House. Congress extended the current rates last summer by one year and expects to further debate higher education spending when it returns to Washington after a Memorial Day break.