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Congress Sends Student Loan Compromise to President’s Desk

August 2, 2013—The House of Representatives July 31 passed, 392-31, a market-based student loan interest rate bill, sending it to the president’s desk for his signature. The final Smarter Solutions for Students Act (H.R. 1911) is designed as a compromise between previous market-based proposals to reverse the July 1 doubling of subsidized Stafford loan interest rates for undergraduates. It will also reduce Stafford interest rates for graduate and professional students, including medical students, this year.

The president expressed his intention to sign the amended H.R. 1911 in a July 23 fact sheet, calling on Congress to “swiftly pass a bipartisan compromise to keep student loan interest rates low this year.” Continuing the partisanship that resulted in congressional gridlock and temporarily doubled subsidized undergraduate interest rates [see Washington Highlights, June 7], the president and House Speaker John Boehner (R-Ohio) each took credit for the bill while criticizing the other party’s previous proposals in opposing statements.

Similar to the House Republicans’ 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 previous levels.

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 the Bipartisan Student Loan Certainty Act (S. 1241), which served as the framework for the eventual compromise [see Washington Highlights, June 28].

In a press release, House Education and Workforce Committee Chair John Kline (R-Minn.) and Subcommittee on Higher Education and Workforce Training Chair Virginia Foxx (R-N.C.) characterized the bill as a “long-term” solution. In contrast, Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Tom Harkin (D-Iowa) has indicated a desire to revisit the issue in the upcoming reauthorization of the Higher Education Act (HEA).


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


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