Holy Student Loan Interest Rate Bills, Batman!
UPDATE: H.R. 1911 (as amended by the Senate) passed both chambers of Congress on July 31 changing interest rates, White House expected to approve the "deal"
Unable to reach a bipartisan solution in Congress, subsidized federal Stafford student loan rates doubled to 6.8% on July 1. Last year, Congress extended the deadline that would have mandated federal interest rates to rise from 3.4% to 6.8%, effectively punting the issue down the road one year. Beginning in earnest with the release of President Obama's Fiscal Year 2014 Budget Request in early April, a number of competing proposals have been introduced in both houses of Congress as potential short or long-term solutions to the problem. The following updates are current as of July 19, 2013:
1. President Obama's Fiscal Year 2014 Budget Request - Employs a market-based solution for setting the federal student loan interest rates. Subsidized Stafford loan rates would be equal to the 10-year Treasury rate plus 0.93 percentage points; unsubsidized Stafford loans would be the Treasury rate plus 2.93 percentage points; Parent-PLUS loans would be the Treasury rate plus 3.93 percentage points.
Status: Budget request submitted on April 10, 2013. As explained in the House Committee on the Budget’s website, the different chambers of Congress are next expected to create a budget resolution. Also, the two chambers are expected to participate in the “annual appropriations process, [which] provides funding for discretionary spending programs through regular annual appropriations bills. Congress must enact these measures prior to the beginning of each fiscal year (October 1) or provide interim funding for the affected programs through a ‘continuing resolution.’” The House and Senate have passed their own budget resolutions (H. Con. Res. 25 and S. Con. Res. 8, respectively), but have not yet agreed on one budget resolution.
2. Smarter Solutions for Students Act (H.R. 1911) - Co-sponsored by US. Rep. John Kline (R-MN) and U.S. Rep. Virginia Foxx (R-NC), the Smarter Solutions for Students Act also employs a market-based solution to determine the federal student loan interest rates. Subsidized and unsubsidized Stafford loan rates would be equal to the 10-year Treasury rate plus 2.5 percentage points; Parent-PLUS loans would be the Treasury rate plus 4.5 percentage points.
Status: H.R. 1911 passed the House on May 23, 2013. Received in the Senate on June 3, 2013. Read the second time in the Senate (as required) on July 18, 2013 and placed on Senate Legislative Calendar under General Orders. Calendar No. 139.
U.S. Rep. Kline: "Today the House has taken action to prevent interest rates from doubling on millions of student loan borrowers. President Obama asked for a long-term, market-based solution and that is precisely what we have delivered. It is now up to the Senate to move forward with its own ideas to solve the problem, so we can come together and send a bill to the president. The American people sent us here to tackle tough issues, not kick the can down the road. The time to act is now. Students, families, and taxpayers cannot afford further delay."
Obama Administration: "While the Administration welcomes action by the House on this issue, H.R. 1911 is the wrong approach. First, the bill would not guarantee low rates for today's students. A rate that continues to vary after the loan has already been taken out would create uncertainty and lessen transparency for students and their families who are making decisions about borrowing for college. Second, the bill's changes would impose the largest interest rate increases on low- and middle-income students and families who struggle most to afford a college education. Third, the bill does not include the President's proposal to extend repayment options to borrowers who have already left school and often face the same debt burdens as current and future students. Finally, the Administration believes that student loan interest rates should not be raised to reduce the deficit. If the President were presented with this legislation in its current form, his senior advisors would recommend that he veto the bill."
3. Comprehensive Student Loan Protection Act (S. 1003) - Co-sponsored by U.S. Senators Tom Coburn (R-OK), Richard Burr (R-NC), and Lamar Alexander (R-TN), this proposed legislation would require that for each academic year, all newly-issued Stafford, Graduate PLUS, and Parent PLUS loans be set to the U.S. Treasury 10-year borrowing rate plus 3 percentage points. It also directs any remaining savings to the Treasury for the purpose of deficit reduction.
Status: Introduced on April 9, 2013, the bill was read a second time (as required) on May 22, 2013 and was placed on the Senate Legislative Calendar under General Orders, Calendar No. 76. Cloture motion on the motion to proceed to measure presented in Senate on June 4, 2013, but was defeated in a party-line vote on June 6, 2013, essentially killing the bill: http://ow.ly/lOtoY.
4. Student Loan Relief Act of 2013 (H.R. 1595) - Sponsored by U.S. Rep. Joe Courtney (D-CT) and co-sponsored by 146 fellow Congressmen, this proposed legislation would extend the Student Loan Relief Act through 2015, thereby defusing the immediate trigger to "buy time for a long-term compromise to reduce student loan debt," Courtney said.
Status: Introduced on April 17, 2013, the bill was referred to the House Committee on Education and the Workforce that same day. Motion to discharge from committee filed on June 13, 2013 (Petition # 113-2).
5. Bank on Students Loan Fairness Act (S. 897) - Sponsored by U.S. Sen. Elizabeth Warren (D-MA), this proposed bill employs another short-term solution for setting the federal student loan interest rates. Under this proposal, subsidized Stafford loan rates would be equal to the same rate that the U.S. government lends money to U.S. banks through the Federal Reserve discount window, or 0.75%, for a period of one year. Her bill does not specifically address unsubsidized Stafford or Parent-PLUS loans.
Status: Introduced as Senate Resolution 897 (S. 897) on May 8, 2013, the bill is currently assigned to the Senate's Committee on Health, Education, Labor, and Pensions.
6. The Responsible Student Loan Solutions Act (S. 909)- Co-sponsored by U.S. Senators Jack Reed (D-RI) and Dick Durbin (D-IL), this proposed legislation (S. 909) would tie federal student loan interest rates to the rate of a 91-day Treasury bill, plus a percentage determined by the Secretary of Education to cover the costs of administering the program, thereby making the program "revenue neutral." Like H.R. 1911 and President Obama's proposals, this would also be a market-based solution.
Status: Introduced and read twice (as required) on May 8, 2013, the bill was referred to the Senate Committee on Health, Education, Labor, and Pensions.
7. The Student Loan Affordability Act (S. 953) - Sponsored by U.S. Senator Jack Reed (D-RI), and co-sponsored by U.S. Senators Tom Harkin, Harry Reid, and Charles Schumer, this proposed legislation (S.953) amends the Higher Education Act of 1965 to extend until June 30, 2015, thereby maintaining the current 3.4 percent interest rate on subsidized Federal Direct Stafford Loans for two years. This bill funds itself by changing three tax provisions.
Status: Introduced on May 14, 2013, the bill was read a second time (as required) on May 15, 2013 and was placed on the Senate Legislative Calendar under General Orders, Calendar No. 74. Cloture motion on the motion to proceed to measure presented in Senate on June 4, 2013, but was defeated in a party-line vote on June 6, 2013, essentially killing the bill: http://ow.ly/lOt3U.
8. Bipartisan Student Loan Certainty Act (S. 1241) - Co-sponsored by U.S. Senators Joe Manchin (D-WV), Richard Burr (R-NC), Tom Coburn (R-OK), Lamar Alexander (R-TN), Angus King (I-ME), and Tom Carper (D-DE), this proposed legislation 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% for subsidized and unsubsidized undergraduate Stafford loans; plus 3.4% for graduate Stafford loans; and plus 4.4% for PLUS loans. 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%. The Congressional Budget Office has determined this proposed legislation would reduce the deficit by $1 billion over ten years.
Status: Introduced on June 27, 2013. Read twice (as required), ordered placed on Senate Legislative Calendar under General Orders, Calendar No. 125.
U.S. Sen. Joe Manchin (D-WV): “Our bill is the only bipartisan, permanent fix that lowers interest rates for all students, especially the poorest, while also putting in place a consolidation cap that ensures student loan interest rates never become unaffordable. We’ve had a year to fix this problem and I refuse to kick the can down the road again. It’s time Congress stops playing politics with our students’ future and passes a commonsense long-term fix.”
Adam Jentleson (spokesperson for U.S. Sen. Harry M. Reid (D-NV)): “There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations. Democrats continue to work in good faith to reach a compromise, but Republicans refuse to give on this critical point.”
9. Keep Student Loans Affordable Act of 2013 (S. 1238) - Sponsored by U.S. Senator Jack Reed (D-RI), and co-sponsored by 43 Senators including Barbara Boxer (D-CA), Sherrod Brown (D-OH), Dick Durbin (D-IL), Tom Harkin (D-IA), Harry Reid (D-NV), Bernard Sanders (I-VT), and Elizabeth Warren (D-MA), this proposed legislation amends the Higher Education Act of 1965 to extend until June 30, 2014, thereby maintaining the current 3.4 percent interest rate on subsidized Federal Direct Stafford Loans for one year, applied retroactively to July 1, 2013. The proposed legislation would fund itself by modifying required distribution rules for pension plans.
Status: Introduced on June 27, 2013. Read twice (as required), ordered placed on Senate Legislative Calendar under General Orders, Calendar No. 124. On July 8, 2013, a motion was passed to proceed to consideration of measure made in Senate. (consideration: CR S5513-5514). On July 9th, a cloture motion on the motion to proceed to measure was presented in Senate. (consideration: CR S5522-5524; text: CR S5522). Also on July 9th, a motion to proceed to consideration of the measure was made in Senate. (consideration: CR S5531-5537, S5543-5564). On Tuesday afternoon, U.S. Senate Majority Leader Harry Reid (D-NV), met with White House Chief of Staff Denis McDonough and Education Secretary Arne Duncan to discuss the bill and its prospects for passage. Cloture motion on the motion to proceed to measure presented in Senate on July 10, 2013, but was defeated in a party-line vote (51-49), essentially killing the bill.
10. Bipartisan Student Loan Certainty Act (S. 1334) - Sponsored by U.S. Senator Joe Manchin III (D-WV), and co-sponsored by U.S. Senators Lamar Alexander (R-TN), Richard Burr (R-NC), Thomas R. Carper (D-DE), Tom Coburn (R-OK), Dick Durbin (D-IL), Tom Harkin (D-IA), and Angus S. King, Jr. (I-ME), this proposed legislation is a revised version of S. 1241. This bipartisan proposal closely resembles H.R. 1911 and would affect interest rates as follows: undergraduate students would pay a rate of 3.85% next year on subsidized and unsubsidized Stafford loans. The plan would cap rates on loans to undergrads at 8.25%, for graduate students at 9.5% and parents at 10.5%.
Status: Introduced on July 18, 2013. Read twice (as required), ordered placed on Senate Legislative Calendar under General Orders, Calendar No. 142.
