House Democrats propose bill to reduce debt burden for graduate students (Michael Simkovic)

Representative Judy Chu (D-CA) (Pasadena) recently introduced H.R. 2526, the Protecting Our Students by Terminating Graduate Rates that Add to Debt (POST GRAD) Act. The bill would restore the in-school interest subsidy for graduate and professional students who borrow federal Direct Stafford Loans.  

Federal in-school subsidies were terminated by The Budget Control Act in 2011, which ended the debt ceiling crisis of 2011.  During the debt ceiling crisis of 2011, Congressional Republicans successfully maneuvered for large cuts to federal spending (other than military spending and pension and health benefits for retirees) by threatening to force the federal government to default on its sovereign debt unless then President Obama agreed to large spending cuts.

The POST GRAD Act would reduce the disparity between funding policy for graduate education and undergraduate education by reinstating graduate students’ eligibility for federal subsidized student loans, although graduate student borrowers, who have lower default rates, would continue to pay a higher interest rate after they complete their studies.

Christopher P. Chapman, CEO of the AccessLex Institute, estimated that the bill would save the typical law student $4,000 if passed.  

If the interest rate subsidy encourages more investment in graduate education, it could more than pay for itself with higher future tax revenue.

 

UPDATE:  The New America Foundation, which has close ties to the private student loan industry, has condemned proposals to reduce federal student loan interest rates.   NAF claims that the immediate benefits of higher education financing only benefit a "small majority" of households and therefore are bad policy.  New America argues that an increased military presence in Syria, Iraq and surrounding countries would be a better use of taxpayer dollars.

 

UPDATE 2, 6/30/2017: The New York Law Journal covers efforts to reduce student loan interest rates for graduate students.