Action heated up in the House and Senate last week on the looming interest rate increase for subsidized student loans, which is slated to double from 3.4 percent to 6.8 percent July 1, with a key House committee approving legislation addressing the issue and a group of senators introducing their own interest rate bill.
The House Education and the Workforce Committee on Thursday approved the Smarter Solutions for Students Act (H.R. 1911). Introduced by John Kline (R-MN) and Virginia Foxx (R-NC), 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.
It would also tie PLUS loans for parents and graduate students to the 10-year Treasury note, plus 4.5 percent. (See the table below for what students and their families would pay under these proposals.)
|Subsidized Stafford Loans
|Unsubsidized Stafford Loans
Note: Interest rate on H.R. 1911 calculated using the 10-year Treasury note rate as of May 15, 2013
ACE and 14 other higher education associations on Wednesday sent a letter and statement of key principles to the committee responding to the House measure.
On Friday, ACE and 12 other higher education associations sent a letter and the statement of principles responding to a Senate student interest rate bill, the Student Loan Affordability Act of 2013 (S. 953). That measure was introduced last week by Tom Harkin (D-IA), chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, Jack Reed (D-RI), Patty Murray (D-WA) and Majority Leader Harry Reid (D-NV).
The Student Loan Affordability Act would freeze student loan interest rates for two years while Congress works on a long-term solution. It pays for this extension with a combination of changes to tax and energy provisions that would not affect students or institutions. It is one of a number of bills that have been proposed in the Senate to address the pending interest rate deadline.
Because the House and Senate approaches are so different, work on a final version both chambers can agree to seems likely to continue right up until the July 1 deadline.