Senate to vote on federal student loan interest rate plan
WASHINGTON – The U.S. Senate is expected to vote today on a proposal to roll back the student loan interest rate that increased from 3.4 percent to 6.8 percent on July 1 because Congress didn’t pass a plan to prevent it.
Sen. John Hoeven, R-N.D., said the proposal likely won’t get enough votes to pass from senators who are weary of again postponing a final decision for another year. Last summer, the Senate approved a one-year extension on the lower rate.
Hoeven said he and a bi-partisan group of senators have co-sponsored an op-tion that would put the issue to rest permanently, and it could come up for a vote in the Senate as soon as today.
The Bipartisan Student Loan Certainty Act borrows elements of several other plans to deal with the interest rate hike, including the Smarter Solutions for Students Act that passed the House in May.
Like the House plan, the bill would calculate interest on new Stafford loans based on the 10-year Treasury rate. Subsidized and unsubsidized loans would be set at the rate of the most recent Treasury rate, currently about 1.8 percent, plus another 1.85 percent – adding up to about 3.65 percent now.
Graduate student and Parent PLUS loans would have slightly higher rates.
If approved, Hoeven said the proposal also would guarantee to borrowers that their payments on the loans wouldn’t exceed 15 percent of their income. After 25 years, any remaining balance would be forgiven.
In a written statement on Tuesday, Sen. Heidi Heitkamp, D-N.D., said she agrees the government “shouldn’t be making money on the backs of students” with high interest rates. But she said she won’t support the House Republican plan that would allow interest rates to reset each year without a cap.
“As one who used student loans to pay for college, I am working with my colleagues to find a solution that keeps rates as low as possible so North Dakota students have the same opportunities I did,” she wrote.
Hoeven said the new legislation he is co-sponsoring would deal with the recent interest spike while also addressing current flaws in the student loan program.
It would lower the rate on unsubsidized Stafford loans from 6.8 percent to about 3.65 percent under current figures, and prevent it from rising beyond 8.25 percent when the Treasury rate goes up.
He said it would eliminate the current practice of subsidizing parts of the Affordable Care Act through the government’s profit on these unsubsidized loans.
Hoeven said it also would be an improvement over the one-year extension expected to be voted on today that would be funded through increased taxes on retirement accounts.
The bill needs to pass the Senate and then earn the support of enough representatives to clear the House. He thinks it has a good chance of doing both, even if it doesn’t get enough votes today or later this week.
“With some additional negotiating, if you will, I think we’ll be able to pass a plan before the end of the month and I think the House will pass something very close to our plan,” he said. “I think it would be something that they’d be willing to pass, and we need to. We need to get this squared away for the students.”
Ryan Johnson, INFORUM