Bipartisan Group of Senators Reach Deal to Lower Rates for All Students
WASHINGTON, D.C. - Today, Assistant Majority Leader Dick Durbin (D-IL) and Senators Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-ME), Tom Coburn (R-OK), Tom Carper (D-DE), Tom Harkin (D-IA), and Lamar Alexander (R-TN) introduced a bipartisan compromise to lower interest rates for 100% of borrowers who have taken out, or will take out, a new federal student loan after July 1, 2013.
“This agreement will ensure students loan rates will fall below the 6.8 percent rate that kicked in on July 1,” said Senator Durbin. “Once again we’ve shown that when both sides work together, we can reach fair and bipartisan solutions to some of the nation’s biggest issues. Now that we’ve found a way to keep student loan rates low, I hope we can return to a more basic conversation about the underlying and unsustainable cost of education in America.”
The bill, the Bipartisan Student Loan Certainty Act, requires that, for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate (as determined by the last auction held before June of each year—not the changing daily rate) plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency.
The resulting interest rates for loans taken out this year, after July 1, 2013, would be 3.86% for subsidized and unsubsidized loans for undergraduate students, 5.41% on unsubsidized loans for graduate students, and 6.41% on PLUS loans for parents and graduate students. These rates would apply retroactively to newly issued loans taken out after July 1, 2013. The interest rate would be fixed over the life of the loan to provide borrowers with certainty to plan for the future.
Additionally, this bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25% for undergraduate students, 9.5% for graduate students, 10.5% for PLUS borrowers. The Congressional Budget Office has determined this legislation would save taxpayers $715 million over ten years.
The full Senate could consider the measure as early as next week.
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