WASHINGTON, D.C. | June 3, 2013 -
By Rep. John Kline (R-MN)
Last summer, debate about student loans reached a fever pitch thanks to a scheduled increase in the interest rate for subsidized Stafford loans made to undergraduate students. The president began touring college campuses, calling on Congress to prevent the increase that his own party set in motion in 2007.
As I said at the time, no one wanted to see interest rates double — particularly at a time when one out of every two college graduates was struggling to find a full-time job. But we need to move away from a system that allows Washington politicians to use student loan interest rates as bargaining chips, creating uncertainty and confusion for borrowers.
When Congress approved legislation to temporarily stave off the Stafford loan interest rate increase, my colleagues and I lent our support with the promise that we would use this time to work toward a long-term solution that better aligns interest rates with the free market.
With the Smarter Solutions for Students Act (HR 1911), which passed the House of Representatives with bipartisan support on May 23, we upheld that promise. This responsible legislation simply moves all federal student loans — except Perkins loans — to a market-based interest rate and builds upon a proposal put forth by President Barack Obama earlier this year.
Just like the president's plan, our legislation will apply a market-based interest rate to all Stafford and PLUS loans, ensuring borrowers will be able to take advantage of today's low rates. But unlike President Obama's proposal, the Smarter Solutions for Students Act takes an additional step to protect borrowers against higher interest rates by imposing a fair and reasonable cap. Based on current market conditions, HR 1911 could lead interest rates to drop by as much as 2 percent for millions of Stafford and PLUS loan borrowers this summer.
Additionally, the legislation maintains students' ability to consolidate their loans upon graduation and lock in a low fixed interest rate for the life of the loan. And students still can take advantage of existing federal repayment and debt management initiatives, such as the generous income-based repayment programs, numerous loan forgiveness programs and opportunities for deferment or forbearance.
The Smarter Solutions for Students Act is a narrow piece of legislation that will provide a lasting solution to the problem facing the federal student loan program. Unfortunately, some critics would rather kick the can down the road and simply extend the current arbitrary rates at a taxpayer cost of about $8 billion dollars. They want to continue the failed status quo and leave politicians in charge of setting rates.
Students deserve better. They shouldn't have to watch as Washington holds their interest rates hostage each election year. They shouldn't have to deal with the uncertainty that comes with waiting for politicians to cobble together another temporary fix to keep interest rates in line with the market.
We all recognize the urgent need to take action. No one wants to see student loan interest rates double on July 1. The president put forth a plan in his budget to address the problem with a market-based solution, and my Republican colleagues and I worked in good faith to offer a proposal that largely mirrors the president's. Despite claims to the contrary, we tried our best to make this proposal budget-neutral to protect both taxpayers and borrowers. And we will continue to consider ideas to improve the proposal through the open legislative process.
We have an opportunity for bipartisan compromise on this matter – something that is all too rare in Washington. President Obama asked for a long-term, market-based solution, and that is precisely what we have delivered with the Smarter Solutions for Students Act. It is now up to the Senate to move forward with its own ideas to solve the problem, so we can come together and send a bill to the president. The American people sent us here to tackle tough issues, not kick the can down the road. The time to act is now. Students, families and taxpayers cannot afford further delay.
To learn more about the Smarter Solutions for Students Act, visit edworkforce.house.gov/SmarterSolutions.
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