Moving in the Right Direction

Two years ago, Washington was embroiled in a classic self-made crisis. Thanks to the political gimmicks of Washington Democrats, interest rates on most federal student loans were set to double. The president called on Congress to pass a long-term, market-based solution that would get Washington out of the business of arbitrarily setting student loan interest rates. 

Under the leadership of Education and the Workforce Chairman John Kline (R-MN), congressional Republicans did just that. Taking up the president’s call, the House passed the Smarter Solutions for Students Act, a long-term, market-based fix that protected millions of borrowers from a costly spike in student loan interest rates.

Yet rather than accept a proposal that reflected his own priorities and the best interests of borrowers, President Obama – along with congressional Democrats – chose to pick a partisan fight.

After months of political theatrics and public pressure, the president finally signed a bill mirroring the commonsense reforms laid out in the House proposal. The law allows borrowers to take advantage of lower interest rates when available, and protects borrowers against higher interest rates by imposing a fair and reasonable cap. Just as importantly, it helps prevent Washington politicians from playing future partisan games with student loans.

Today, the Smarter Solutions for Students Act looks smarter than ever. As the Wall Street Journal reported, market-based student loan rates will fall across the board. Interest rates on undergraduate Stafford loans will drop from 4.66 percent to 4.29 percent, while rates on graduate Stafford loans will decrease from 6.21 percent to 5.84 percent, and rates on PLUS loans will go from 7.21 percent to 6.84 percent.

As Chairman Kline noted two years ago:                                                            

Changing the status quo is never easy. Returning student loan interest rates to the market is a longstanding goal Republicans have been working toward for years …I applaud my colleagues on the other side of the aisle for finally recognizing this long-term, market-based proposal for what it is: a win for students and taxpayers.

     
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