Groups note concerns about potential future interest rate increases and higher graduate rates
ACE sent a letter yesterday signed by a number of other higher education associations asking senators to vote for the Bipartisan Student Loan Certainty Act of 2013 (S. 1334), which is slated to receive a Senate floor vote as early as today.
The agreement reached by Senate negotiators last week encompasses all student loans but was prompted by the doubling of rates on subsidized Stafford loans to 6.8 percent July 1. A previous compromise plan was abandoned due to a $22 billion cost estimate.
“We realize this has been a complicated effort, and we are pleased the Senate has reached a bipartisan agreement on this vital issue,” the letter states.
However, the letter also expresses concern that the bill uses a market-based interest rate that means the cost of borrowing could still rise significantly, noting that, “If this happens, we would urge Congress to revisit this issue and take appropriate action.”
The letter notes that the bill requires, for the first time, graduate and professional students to pay a higher interest rate than undergraduates.
“This exacerbates a troubling pattern of increasing the costs of education for students pursuing the advanced degrees our economy needs,” the letter states. “We appreciate your efforts to address student loan interest rates as quickly as possible, but we ask that you restore the equal treatment of graduate student loans at the earliest opportunity.”
Under the bill, interest rates on both subsidized and unsubsidized undergraduate Stafford loans would be tied to the 10-year Treasury rate with an add-on of 2.05 percent. Rates on these loans would be set at the time the loan is taken out, fixed for the duration of the loan, and capped at 8.25 percent to guard against future increases in market rates.
The plan takes a similar approach to Stafford loans for graduate students, which would have a 3.6 percent add-on and a cap of 9.5 percent, and PLUS loans, which would have a 4.6 percent add-on and a 10.5 percent cap. The bill would generate $715 million in savings, which would be used for deficit reduction.
ACE President Molly Corbett Broad last week issued a statement of support for the bill that urged the Senate to pass it swiftly.