Student Loan Interest Rate Update

From the SASFAA Legislative Relations Committee:

Several Senators are set to introduce a bipartisan bill to prevent the student loan interest rate hike scheduled for July 1, 2013.  Senators Joe Manchin (D-WV), Richard Burr (R-NC), Tom Coburn (R-OK), Lamar Alexander (R-TN), and Angus King (I-ME) plan to introduce the "Bipartisan Student Loan Certainty Act" to prevent rates from increasing.

According to press the bill would prevent rates from increasing and lower them for 100% of newly issued loans.  the bill would require that, for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate plus 1.85% for subsidized and unsubsidized undergraduate Stafford loans; plus 3.4% for graduate Stafford loans; and plus 4.4% for PLUS loans. The interest rate would be fixed over the life of the loan and the cap on interest rates for consolidated loans would remain at 8.25%. The Congressional Budget Office has determined this legislation would reduce the deficit by $1 billion over ten years. The proposal reportedly is not supported by Senator Harkin.

Another proposal from Senators Harkin/Reid/Warren provides a cap but with a higher mark-up rate.  This proposal also carries a 5 year cost but a 10 year savings.  This bill does not have any Republican support.  Some Senate Democrats are still pushing for a one year extension of the 3.4% interest rate.

It is unknown whether Congress can reach a deal prior to the July 1st deadline (we all watched this unfold last year as well).  However the Senate is in session until today and the House is in session until tomorrow.  Congress could always let the rates go up then act retroactively as well.

Until later today,

Amy Berrier
Assistant Director for Operations
UNC Greensboro Financial Aid Office
SASFAA Legislative Relations Chair
alberrie@uncg.edu