The senior Republican on the U.S. Senate education committee said that if Congress acts next week, there is still time to avoid today’s automatic increase in interest rates from 3.4 to 6.8 percent on 40 percent of all new government loans for college students.
Lamar Alexander (R-Tenn.) said that today's rate hike “is completely unnecessary and constitutes congressional malpractice by some Democratic senators who are stubbornly holding out for a short-term political fix that only helps a minority of students.”
Alexander said that the Senate next week should adopt instead a bipartisan plan offered by six senators that “would save students billions of dollars in interest payments and cut rates nearly in half for all new undergraduate student loans. Why should Congress adopt a short-term political fix that only helps 40 percent of students when there is an obvious permanent solution that will reduce interest rates for every one of the 18 million new loans that 11 million students will take out this year?”
He said the six senators have coalesced around a common idea similar to an idea proposed by President Obama in his budget and passed by the House of Representatives in May.
On June 27, U.S. Senators Joe Manchin (D-W. Va.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.), Angus King (I-Maine), and Tom Carper (D-Del.) and Alexander introduced the Bipartisan Student Loan Certainty Act, a compromise bipartisan solution that would have prevented student loan interest rates from doubling on July 1 and provided a permanent solution that would have lowered and fixed interest rates for 100 percent of newly issued student loans.
The Student Loan Certainty Act requires that, for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate plus 1.85 percent for subsidized and unsubsidized undergraduate Stafford loans; plus 3.4 percent for graduate Stafford loans; and plus 4.4 percent for PLUS loans (offered to parents and graduate students). The interest rate would be fixed over the life of the loan and the cap on interest rates for consolidated loans would remain at 8.25 percent. The Congressional Budget Office has determined this legislation would reduce the deficit by $1 billion over ten years.