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Senate Passes Student Loan Interest Compromise

July 26, 2013—The Senate July 24 passed an amended Smarter Solutions for Students Act (H.R. 1911) that would establish a market-based student loan interest rate, similar to the Bipartisan Student Loan Certainty Act (S. 1241) and the President’s Budget. The measure is designed as a compromise between previous market-based proposals to reverse the July 1 doubling of subsidized Stafford loan interest rates for undergraduates.

Senators Joe Manchin (D-W.V.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.), Lamar Alexander (R-Tenn.), Angus King (I-Maine), and Tom Carper (D-Del.) June 27 first introduced S. 1241 [see Washington Highlights, June 28].

Similar to the House Republican’s and the president’s proposals, the compromise sets interest rates each academic year based on the U.S. Treasury 10-year borrowing rate plus 2.05 percentage points for subsidized and unsubsidized undergraduate Stafford loans, plus 3.6 percentage points for graduate Stafford loans, and plus 4.6 percentage points for PLUS loans (including GradPLUS). The interest rate would be capped at 8.25 percent, 9.5 percent, and 10 percent, respectively, and fixed over the life of the loan. 

Based on current 10-year Treasury rates, the proposal would reduce unsubsidized Stafford loan interest rates for medical students from 6.8 percent to 5.41 percent.  Likewise, it would reduce GradPLUS interest rates from 7.9 percent to 6.41 percent. However, the Congressional Budget Office (CBO) anticipates that interest rates will eventually rise above current levels.

After opposing the measure in favor of an extension of current rates, Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Tom Harkin (D-Iowa) voted in favor of the bill and indicated he intends to revisit the issue in the upcoming reauthorization of the Higher Education Act (HEA).

The House is expected to approve the measure for the president's signature.


Matthew Shick, JD
Director, Gov't Relations & Regulatory Affairs
Telephone: 202-862-6116


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
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Telephone: 202-903-0806