Lawmakers are considering a bipartisan and White House-supported compromise on student loans this week, in the form of the Bipartisan Student Loan Certainty Act, co-authored by Maine’s Independent Senator Angus King. The US Senate is expected to vote on the bill this week, or before August recess.
The bill, which Republican Senator Susan Collins also supports, would lower the interest rate for 100 percent of borrowers who have taken or will take out a new federal student loans after July 1, 2013, and would reverse the subsidized Stafford student loan rate jump that took effect earlier this month. It would align newly issued federal student loan interest rates to the US Treasury’s 10-year borrowing rates, and set a cap on rate increases.
Rates for loans taken out after July 1, 2013:
> 3.86 percent on subsidized and unsubsidized loans to undergraduates (which comprise two-thirds of all student loans); capped at 8.25 percent
> 5.41 percent on unsubsidized loans to graduate students; never to go above 9.5 percent
> 6.41 percent on PLUS loans to parents and grad students; never to exceed 10.5 percent
These rates would be fixed over the life of the loan (hence the word “certainty” in the bill title), and it’s worth noting that under Congressional Budget Office projections, interest rates are not expected to reach the established caps.
According to the White House press office, the senate plan will affect 39,186 students in Maine, saving the typical undergraduate student in this state more than $1300 over the life of applicable loans.
The House already passed a (dissimilar) companion bill, called the Smarter Solutions for Students Act, in May (Maine Democrats Mike Michaud and Chellie Pingree both voted against it, claiming it would raise higher education costs while also making them less predictable). President Obama also opposed the House bill, rejecting the idea that raising student loan rates is a viable way to reduce the deficit.
The Senate plan acknowledges that the conversation about student loans and debt is ongoing, and sure to be revisited next year when Congress tackles reauthorization of the Higher Education Act, which governs administration of federal student aid.
“[T]his proposal will direct the Government Accounting Office to conduct a study on the true cost of the federal student loan program, to better inform our efforts as the [Senate Health, Education, Labor, and Pensions] Committee moves towards the reauthorization of the Higher Education Act,” said Iowa Democrat Tom Harkin, chairman of that committee, in a statement. “Indeed, the upcoming reauthorization of the HEA will be a historic opportunity to get a handle on runaway costs and stop the shifting of costs to students.”