Durbin Applauds Senate Passage of Bipartisan Student Loan Interest Rates Bill
Legislation Will Reduce Interest Rates For All Borrowers
[URBANA] – U.S. Senator Dick Durbin (D-IL) today applauded the Senate’s passage of a bipartisan bill to lower the interest rates of federal student loans this year for all borrowers who have taken out, or will take out, a new loan after July 1, 2013. The legislation passed on an 81-18 vote on Wednesday.
“This week, an overwhelming majority of Senators from both parties came together to lower interest rates on all student loans,” Durbin said. “The 380,000 Illinois undergrads getting ready to take out federal loans will see their interest rates drop by 3 percent as a result. Pursuing a college education is part of the American dream, and young people shouldn’t have to face sky-high interest rates to gain an education. I hope my colleagues in the House will work quickly to pass this 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 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. These rates would apply retroactively to newly issued loans taken out after July 1, 2013 and would be fixed over the life of each loan to provide borrowers with certainty to plan for the future.
The bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25% for undergraduates, 9.5% for graduate students, and 10.5% for PLUS borrowers. The Congressional Budget Office has determined this legislation would save taxpayers $715 million over ten years.
Student loan debt has now surpassed credit card debt in America, totaling over $1 trillion. In early July, interest rates on federally subsidized loans doubled to 6.8%. Allowing that interest rate to remain at 6.8% would have added over $30 billion in interest to students’ debt over the next four years. With the rate reduction provided by the Senate’s bill, the average undergraduate student will instead save between $2,000 and $3,000 in interest over that time. Graduate students will save between $4,000 and $9,000 over the same period.
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