Congress Headed Towards Partisan Fight Over Student Loan Interest Rates
May 16, 2013
Today, the U.S. House of Representative’s Education and the Workforce Committee is set to mark up a bill today that would treat the subsidized and unsubsidized portions of the Stafford federal student loan the same, pegging their interest rates to the 10-year Treasury rate. The Smarter Solutions for Students Act (H.R. 1911) would also cap the rates to protect borrowers against anomalies.
The House bill under consideration conflicts with Senate legislation introduced on Wednesday. The Student Loan Affordability Act of 2013 (S. 953), sponsored by Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA), Senator Jack Reed (D-RI), and Senate Majority Leader Harry Reid (D-NV), would maintain the current 3.4 percent interest rate on subsidized student loans for another two years at a cost to the government of $8.6 billion. The interest rate for subsidized Stafford loans is set to double to 6.8 percent on July 1 if Congress fails to act on an alternative plan.
The proposal would temporarily prevent the interest rate from increasing until the issue can be considered in the reauthorization of the Higher Education Act, which is set to expire at the end of the year. The legislation would pay for the extension through changes to tax law affecting retirement accounts, the oil industry and tax deductions for foreign companies.
“This is an issue of fairness. Instead of raising interest rates on families struggling to pay for college, Congress should close costly, special interest tax loopholes. This legislation will protect taxpayers and keep student loan interest rates affordable while ending wasteful subsidies for oil companies and reducing the amount of taxes lost to tax havens,” said Sen. Jack Reed.
“A college education is an important investment in individuals and our nation’s future economic competitiveness,” Reed continued. “The Student Loan Affordability Act is a fiscally responsible way to keep interest rates low and give Congress time to work on a bipartisan, long-term fix.”
Several other interest rate proposals are already on the table. President Obama’s, included in his budget request for fiscal year 2014, would also tie interest rates to 10-year Treasury bonds. Senate Republicans have introduced a bill similar to the president’s plan, while two Senate Democrats introduced their own plan last Thursday, which would create a variable interest rate tied to the 91-day rate on Treasury bonds. Additionally, Senator Elizabeth Warren, a Massachusetts Democrat, also introduced a proposal last week to have the Federal Reserve fund student loans and charge the same interest rate as it does for banks “ currently 0.75 percent.
The many options, and the apparent disagreement among Senate Democrats and the White House, mean that the fate of the bill could rest on whether the House Smarter Solutions for Students Act can pass with bipartisan support and be amended in the Senate, according to Inside Higher Ed.
Related Links:
The Smarter Solutions for Students Act (H.R. 1911)
https://edworkforce.house.gov/smartersolutions/
The Student Loan Affordability Act of 2013 (S. 953)
https://www.harkin.senate.gov/press/release.cfm?i=342757
Inside Higher Ed
Michelle Cormier Mott
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