WASHINGTON -- Representative George Miller (D-CA) today released a new report (pdf file) from the independent, nonpartisan Congressional Research Service (CRS) that shows that student loan borrowers could wind up paying as much as $5,484 in additional interest over the life of their loans if their ability to consolidate the loans at low fixed rates is taken away.

Congress is in the midst of considering whether to make changes to the student loan program as part of the reauthorization of the Higher Education Act. Miller, the senior Democrat on the House Education and the Workforce Committee, said that he favors making some changes to the loan program to protect taxpayers from the rising cost of subsidizing the program.

But Miller stressed that discussions about how to keep the program’s costs down must include the substantial taxpayer subsidies paid to banks in the student loan program, since these institutions already enjoy robust profits and carry virtually no financial risk. Miller said that scrapping students’ ability to consolidate loans at low fixed rates altogether - a proposal being pushed on Capitol Hill by major banking institutions - will place an excessive burden on students.

“The Congressional Research Service’s analysis makes it clear that the big banks’ plan to eliminate the low fixed rate on student consolidation loans is a raw deal for students, and there are better ways to change the program without putting college even further out of reach for many students,” said Miller.

The CRS analysis finds that a typical student borrower with $17,000 in debt would have to pay an extra $5,484 in interest over the life of the loan, assuming a 15-year repayment term, if the loan were consolidated at a variable interest rate rather than a fixed interest rate.

“Students are taking on more and more debt to cover the increasing price of a higher education, and working long hours while in school. Meanwhile, banks are earning big profits while taking on virtually no risk,” Miller said. “We need to address the rising costs of this program, but not by punishing students. Student loan reforms must balance the needs to protect students from unreasonable higher costs while also ensuring that taxpayers are treated fairly.”

Miller favors more sensible changes, like reducing excess subsidies to banks and targeting the low-fixed-rate benefit to borrowers with financial need. He is opposed to changing the program in a manner that would simply saddle all low- and middle-income student borrowers with thousands of dollars of extra loan costs.

Big banks dislike the student consolidation program because of increasing competition within the consolidation market, which has forced them to offer student borrowers better deals to attract their business, and because they must pay fees to participate.

Supporters of the banks’ proposal argue that Congress should do more to help students still in school, while the consolidation program mainly benefits graduates that are now working adults with high incomes. But a study released last year from the Center for Economic and Policy Research shows that students from low-income families are more likely to carry larger debt burdens than their more affluent peers. The study also found that students graduating into lower-paying jobs pay off their loans much more slowly than graduates with higher-paying jobs.