Amodei urges Senate to prevent student loan rates from doubling
FOR IMMEDIATE RELEASE Contact: Brian Baluta, 202-225-6155
June 28, 2013
WASHINGTON, D.C. –Congressman Mark Amodei (NV-2) today urged the Senate to take action to prevent student loan rates from doubling on millions of borrowers. The House passed H.R. 1911, the Smarter Solutions for Students Act, to stop the rate hike more than a month ago on May 23, 2013. The measure is similar to the plan proposed in President Obama’s budget.
“Students and families, who are trying to plan for college, deserve better. They are stuck in limbo right now because politicians put themselves in charge of setting interest rates, which time and again creates this down-to-the-wire uncertainty,” said Amodei. “What we need is a long-term solution that gets Washington out of the business of setting rates altogether. The House has done its job and passed a solution in keeping with the President’s own plan. It’s time for the Senate to act before the rates double on July 1.”
If the Senate fails, interest rates will double from 3.4 percent to 6.8 percent on new subsidized Stafford Loans for undergraduates. The House is the only chamber of Congress that has moved to solve this problem.
In his budget, President Obama offered a plan for long-term reform by tying interest rates to the market. In response, Republicans put together a measure to accomplish that: H.R. 1911, the Smarter Solutions for Students Act, which passed the House weeks before the July 1 deadline.
Senate Democrats have actively blocked the President’s plan, refuse to consider the House’s solution, and neglected to passed a plan of their own. Last week, House Speaker John Boehner wrote to the President asking him to intervene.
“This waiting until the 11th hour is a perfect reason why we need to take the politics out of student loans to give students and families the predictability they need to pursue higher education,” said Amodei.
Background:
In 2007, the Democrat-led Congress approved legislation to temporarily phase down the interest rate on subsidized Stafford Loans from 6.8 percent to 3.4 percent over four years. Once the law expired in 2012, the interest rates would jump back to 6.8 percent. Despite a one-year extension of the lower interest rate, students and families will see interest rates for new loans double on July 1, unless a long-term solution to the problem is enacted.
H.R. 1911, the Smarter Solutions for Students Act would move all federal student loans (except Perkins Loans) to a market-based interest rate, which is in agreement with the President’s FY 2014 budget request.
Smarter Solutions for Students Act would:
- Calculate subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury Note plus 2.5 percent.
- Calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury Note plus 4.5 percent.
- Reset student loan rates once a year, allowing rates to move with the free market and ensuring borrowers can take advantage of lower interest rates when available.
- Protect borrowers in high interest rate environments by including a 8.5 percent cap on Stafford Loan interest rates and a 10.5 percent cap on PLUS loans.
- Provide stability for low- and middle-income students working to finance postsecondary education, and prevents future uncertainty about whether Congress is going to act in time to change the interest rate.
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