On July 24, the Senate approved the Bipartisan Student Loan Certainty Act of 2013 (S. 1334), legislation aimed at creating a long-term fix for student loan interest rates. The vote was 81 to 18. The White House issued a statement of support, and House Majority Leader Eric Cantor (R-VA) has said the House would vote on the bill this week.
The Senate-passed bill uses a market-based plan, similar to an earlier plan presented by the Administration and later modified by the House (H.R. 1911). S. 1334 includes a rate cap and also would lock in the interest rate on a loan when it is first made, at these rates:
- Subsidized Stafford Loans for Undergraduates: 10-year Treasury plus 2.05 percentage points.
- Unsubsidized Stafford Loans for Undergraduates: 10-year Treasury plus 2.05 percentage points.
- Unsubsidized Stafford Loans for Graduate Students: 10-year Treasury plus 3.6 percentage points.
- PLUS Loans: 10-year Treasury plus 4.6 percentage points.
The rates would be capped at 8.25 percent for undergraduate loans, at 9.5 for unsubsidized graduate student loans, and at 10.5 percent for PLUS loans for parents and graduate students. For undergraduates this fall, the loan rate would be 3.86 percent.
The interest rates for loans taken out this year, after July 1, 2013, would be 3.86 percent for subsidized and unsubsidized loans for undergraduate students, 5.41 percent on unsubsidized loans for graduate students, and 6.41 percent on PLUS loans for parents and graduate students. These rates would apply retroactively to newly issued loans taken out after July 1, 2013.
In a July 3, blog post, the U.S. Department of Education noted, "If the law is changed, the Department and its servicers will adjust rates for all affected borrowers, including those who had already received their first subsidized loan disbursement, without any further action on the part of the borrower or the school."
The Congressional Budget Office estimates that the Senate-approved plan would save the government $715 million over 10 years.
The Senate Health, Education, Labor, and Pensions Committee is expected to revisit the issue of student loan interest rates during reauthorization of the Higher Education Act.