A range of legislative choices to revamp the federal student loan system emerged in Congress this week, as the interest rate on subsidized student loans is poised to double from 3.4 percent to 6.8 percent July 1.
The most recent proposal was introduced yesterday when Reps. John Kline (R-MN) and Virginia Foxx (R-NC) of the House Education and Workforce Committee introduced the Smarter Solutions for Students Act (H.R. 1911). This bill would tie both subsidized and unsubsidized Stafford student loan rates to the 10-year Treasury note, plus 2.5 percent, and end the rate differentiation between the two types of loans.
Additionally, it would calculate Parent and GRAD PLUS loans at the 10-year Treasury note, plus 4.5 percent. Interest rates would be reset yearly and be capped at 8.5 percent for Stafford Loans and at 10.5 percent for PLUS Loans.
The bill is broadly similar to the plan President Obama proposed in his FY 2014 Budget; however, the president’s plan would still differentiate between subsidized Stafford, unsubsidized Stafford and PLUS loans, and there would be no cap on the interest rates.
A range of proposals remain in play in the Senate, including those offered by Sens. Lamar Alexander (R-TN), Richard Burr (R-NC) and Tom Coburn (R-OK); Sen. Jack Reed (D-RI); and Sen. Elizabeth Warren (D-MA).
For more details, see the coverage in this morning’s papers:
Lawmakers Propose Long-Term Solutions for Student-Loan Interest RatesThe Chronicle of Higher Education