At a time when 50 percent of recent college graduates in America are unemployed or underemployed and college costs continue to skyrocket, Congress cannot allow the burden of student loans to double. That's why Congressman John Carter (R-TX31) voted today in favor of the Smarter Solutions for Students Act (H.R. 1911), which would take the government out of the business of calculating student loans and prevent student interest rates from doubling on July 1st to 6.8 percent.
This bill permanently moves all new student loans (except Perkins loans) to a market-based interest rate. The legislation authorizes the interest rates on these loans to adjust once per year on July 1st. Additionally, this bill reduces the deficit by $3.7 billion over 10 years, according to the Congressional Budget Office (CBO).
According to the Education and the Workforce Committee, the Smarter Solutions for Student 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.
"As a father of four, I understand the burden of education costs. It's time to stop kicking the can down the road and create a permanent solution to our student loan problem. Students have the right to take out a loan at a fair market-based interest rate and to stop worrying about if the government is going to let their interest rates double every summer."
Rep. Carter has worked with the Texas Guaranteed Student Loan Corporation (TG) to ensure students in the 31stDistrict receive the best education possible at the most competitive price.
"With over 30 years experience in helping students to repay their loans and institutions to manage their student loan delinquencies and defaults, TG is very familiar with all of the issues associated with student loan debt and the "fixed interest rate vs. variable interest rate' debate," said Sue McMillin, President and CEO of TG. "The vote today in the House on H.R. 1911 is a good start toward, ultimately, settling on a market-based methodology for setting interest rates on federal student loans that relate to other rates in the economy. TG looks forward to the resolution of this issue and Congress moving on to address student loan repayment challenges."
The Smarter Solutions for Students Act is a lasting solution that keeps students from seeing their interest rates double this July. In the past, Chairman Carter supported H.R. 4348, which included a provision that prevented the interest rates for Stafford loans from doubling in 2012.