The House of Representatives voted 221-198 May 23 to approve the Smarter Solutions for Students Act (H.R. 1911), legislation intended to address the upcoming interest rate increase for subsidized student loans. The rate currently is slated to double from 3.4 percent to 6.8 percent July 1.
The bill, which passed largely along party lines, 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.
It would also tie PLUS loans for parents and graduate students to the 10-year Treasury note, plus 4.5 percent. These rates would reset every year, like adjustable rate mortgages.
The Obama administration released a Statement of Administration Policy May 22 in advance of the House vote, saying that if "the president were presented with this legislation in its current form, his senior advisors would recommend that he veto the bill." Secretary of Education Arne Duncan also released a statement expressing concern about the House approach, although earlier in the week he had positive things to say about the measure when he appeared before the House Education and the Workforce Committee.
The committee pushed back immediately on both the president’s veto threat and Duncan's statement, reinforcing its support for the bill and intent to find a solution "that both the House and the president can support." (Click here and here to read the committee statements.)
ACE released a statement of support upon the bill’s passage, saying the measure “meets many of the criteria that we believe are needed to permit students to access loans on reasonable terms, such as adopting a variable interest rate with a cap, rather than a rate Congress selects for them.”
ACE’s statement also expressed support for the Student Loan Affordability Act (S. 953), legislation introduced in the Senate by Majority Leader Harry Reid (D-NV) and Sens. Tom Harkin (D-IA), Jack Reed (D-RI) and Patty Murray (D-WA), saying that “although these two bills take different approaches toward addressing the rate hike, we believe the best hope of getting a good deal for students is for a strong House bill and a strong Senate bill to meet in conference in order to create a bipartisan fix before the July 1 deadline.”
The Senate is expected to take up S. 953 soon after returning from the Memorial Day recess next week. ACE sent a letter of support and statement of key principles on student loan legislation May 17 to the bill's sponsors.