Senate Approves Bipartisan Bill to Prevent Doubling of Student Loan Interest Rates

Press Release

U.S. Senator Kelly Ayotte (R-NH) said that bipartisan legislation to protect student borrowers from a doubling of student loan interest rates is good news for New Hampshire students who are headed back to school this fall. The Bipartisan Student Loan Certainty Act, which contains proposals from a bill she helped introduce last month, was overwhelmingly approved today by the Senate in a vote of 81 to 18.

"With a new academic year just around the corner, passage of this bipartisan bill is welcome news for New Hampshire students," said Senator Ayotte, who recently called for action on this issue on the Senate floor. "This legislation is fair to students, it's fair to parents, and it's fair to taxpayers. The bill incorporates proposals from the President as well as from House Republicans, and it should be signed into law right away."

The Bipartisan Student Loan Certainty Act will lower interest rates for 100 percent of borrowers who have taken out, or will take out, a new federal student loan after July 1, 2013. Under the bill, student loan interest rates would be tied to the 10-year Treasury note plus differentiated percentages - to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency - for undergraduate, graduate, and PLUS loans. Interest rates would be fixed over the life of the loan to provide borrowers with certainty to plan for the future.

* Subsidized and unsubsidized undergraduate loans: 10-year Treasury note plus 2.05 percent (8.25 percent cap);
* Graduate loans: 10-year Treasury note plus 3.6 percent (9.5 percent cap);
* PLUS loans: 10-year Treasury note plus 4.6 percent (10.5 percent cap).

The Bipartisan Student Loan Certainty Act was introduced by Senators Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-ME), Tom Coburn (R-OK), Tom Carper (D-DE), Tom Harkin (D-IA), Lamar Alexander (R-TN), and Dick Durbin (D-IL).

At a Senate Budget Committee hearing in June, Senator Ayotte urged colleagues on both sides of the aisle to come to a bipartisan agreement to prevent a student loan rate hike. During an exchange at the hearing with Secretary of Education Arne Duncan, she stressed the need to provide certainty for all new federal student loan borrowers.

In 2007, Congress temporarily lowered interest rates on subsidized Stafford loans over 4 years from 6.8 to 3.4%. In 2012, Congress extended these low rates for 1-year at a cost of nearly $6 billion with the expectation that Congress would find a long-term fix during that year. On July 1, 2013, the one year extension expired.

Source