Bill to make long-term fix to interest rate hike passes Senate
Jul 24 2013
WASHINGTON –Calling it a “smart compromise solution” to the interest rate increase on federal Stafford loans, U.S. Senator John Boozman (R-AR) today voted for the bipartisan agreement that passed the Senate 81-18.
“After a great deal of discussion between all sides, we were finally able to pass a smart compromise solution to restore lower interest rates on student loans through the Senate with the support of a majority of Democrats and Republicans. It goes to show that when everyone is willing to work together, we really can solve issues that matter to Americans,” Boozman said. “It’s taken awhile, and that’s not all bad. It’s helped ensure we do the right thing, instead of rushing to just do something that ends up causing more harm than help in the end.”
Boozman added, “The sticking point had been whether we find a long-term solution that is better for students, parents and graduates or do we just continue to kick the can down the road like we did last year. I am pleased that we were able to come to a commonsense agreement that addresses this issue well beyond the one-year extension previously proposed while lowering the rate for 100 percent of students next year and saving taxpayers money.”
The bill sets the interest rate on all newly issued loans to the U.S. Treasury ten-year borrowing rate, plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency. These rates are locked in for the lifetime of the loan, but rates on new loans reset each year.
Under current law, the federal government issues loans to students based on statutorily-set rates (6.8% for Stafford loans and 7.9% for PLUS loans) regardless of market forces or borrowing costs. According to the Congressional Budget Office (CBO), changing this to a market-based rate will save taxpayers $715 million over ten years.