Debate over student loan interest rates continues

MILWAUKEE (WITI) -- When lawmakers failed to act at the beginning of July, interest rates on student loans doubled, affecting almost 70% of Wisconsin's college students. Now students across Wisconsin, and the country, are finding themselves increasingly worried about the high cost of tuition and the loans needed to cover it.

"I'm going to school full time and working. It's coming out of my pocket," said Kenya Stevens, a junior at UWM.

The good news on Wednesday, July 24th, is the U.S. Senate passed legislation making it less expensive to take out loans -- however, interest rates could rise once again.

Wisconsin Republican Ron Johnson was one of 81 senators who voted for the measure, which would cut the current interest rate of 6.8% by three points.

"This proposal sets the current Stafford undergraduate loan at 3.8%. It had been set at an artificially low rate of 3.4% and those rates will vary as the 10-year treasury bill varies over the next ten years," said Johnson.

Democrat Tammy Baldwin says she voted against the plan due to the potential for shifting rates. She and other democrats agree the plan could be a "bait-and-switch" that would lure in new borrowers only to raise interest rates a few years later.

"A college education should be a path to prosperity, a path to the middle class, not a path to indebtedness," said Baldwin. "A current freshman in high school will end up with a much higher rate than the cap contained in the current U.S. law."

67% of graduates in Wisconsin have student loan debt. Over the last four decades, the average amount owed has soared from approximately $6,000 in 1985 to a projected $30,000 in 2015.

Scot Ross of One Wisconsin Now is an advocate for wholesale reform of student loan debt. Ross believes the current senate deal is just a short term solution.

"The problem with the compromise is that it does nothing with the existing $1.2 million of student loan debt," said Ross. "Students and middle class families are being squeezed evermore, simply to get a higher education and job training skills."

Senator Johnson rebuts saying, "it does solve the problem long-term and it also takes care of 100% of student loans, so I respectfully disagree."

The plan, which is similar to the one passed in the House of Representatives, would cap interest rates at 8.25%. The White House estimates a savings of approximately $1,500 per undergraduate.