A bipartisan group of senators recently introduced legislation that would prevent student loan interest rates from doubling and would lower and fix interest rates for 100 percent of newly issued student loans.
Sponsors of the bill, named the Bipartisan Student Loan Certainty Act, include Sens. Joe Manchin (D-W.Va.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.) Lamar Alexander (R-Tenn.) Angus King (I-Maine) and Tom Carper (D-Del.).
The proposed bill requires that, for each academic year, all newly-issued student loans be set to the Treasury Department’s 10-year borrowing rate plus 1.85 percent for subsidized and unsubsidized undergraduate Stafford loans; plus 3.4 percent for graduate Stafford loans; and plus 4.4 percent for PLUS loans.
Language in the proposed bill requires the interest rate to be fixed over the life of the loan and the cap on interest rates for consolidated loans would remain at 8.25 percent.
The Congressional Budget Office said the legislation would reduce the deficit by $1 billion throughout ten years.
“Last year we kicked the can down the road and passed a one-year extension for only a small group of students,” Burr said. “We can look back and know that if the bipartisan bill we’re introducing today had been passed last year, students and their parents would have saved billions of dollars in interest payments. Why would we make the same mistake again and just kick the can down the road another year? “
Four out of every five students with subsidized Stafford loans currently take out other federal loans with rates at 6.8 percent or 7.9 percent.