|WASHINGTON, D.C. – House Committee on Education and the Workforce Chairman John Kline (R-MN) and Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) today introduced legislation to tackle the upcoming student loan interest rate cliff by moving to a market-based solution.
The Smarter Solutions for Students Act (H.R. 1911) would take politicians out of the business of calculating student loan interest rates by moving all federal student loans (except Perkins Loans) to a new interest rate formula based on the 10-year Treasury Note, similar to a proposal put forth in President Obama’s Fiscal Year 2014 budget plan.
"As I’ve said time and again, we’ve got to stop kicking the can down the road with short-term fixes to this interest rate problem,” Chairman Kline said. "The Smarter Solutions for Students Act is a lasting solution that will serve the best interests of students and taxpayers. Our proposal ensures millions of subsidized Stafford Loan borrowers will not see their interest rates double this July, and other borrowers will actually have their rates reduced. I hope my colleagues in the House and Senate will join us in supporting this responsible bill, and look forward to continuing to work with the administration as we move this proposal through the legislative process."
"Students need more certainty and less confusion about their federal loan interest rates," said Rep. Foxx. "Republicans have been working to provide stability for a long time and it appears from the President’s budget proposal that he also sees the need to remove the whims of Washington from the student loan equation. We hope to build off that common ground through the Smarter Solutions for Students Act and work with Congressional Democrats to return to a simplified, market-based plan before July 1 that work`s for students, families, and taxpayers."
The Smarter Solutions for Students Act:
- Calculates subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury Note plus 2.5 percent.
- Calculates graduate and parent PLUS loans using a formula based on the 10-year Treasury Note plus 4.5 percent.
- Resets student loan interest rates once a year, allowing rates to move with the free market and ensuring borrowers can take advantage of lower interest rates when available.
- Protects 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.
- Provides stability for low- and middle-income students working to finance their postsecondary education, and prevents future uncertainty about whether Congress is going to act in time to change the interest rate.
To learn more about H.R. 1911, visit edworkforce.house.gov/smartersolutions.