Senator John Hoeven today issued the following statement following a vote on two measures to address the expiration of current rates on federally subsidized student loans on July 1, neither of which passed:
"Today, the U.S. Senate voted on two bills to address the subsidized student loan rates that are scheduled to expire on July 1. While neither measure passed, it is clear that Congress needs to come together to find a way to provide America's young people with access to an affordable education beyond temporary extensions of the current program.
"I supported the extension passed last year and was on the conference committee that helped get it passed. The intent was to provide time to get a permanent solution and that's what we need to put in place now. We need a permanent solution.
"The plan I supported today ties all federal student-loan interest rates to the 10-year Treasury rate, currently 1.75 percent. It then adds 3 percent to cover the cost of administering the program. That would make the current rate for all student loans a low 4.75 percent. That is a reduction from the 6.8 percent, which 60 percent of student loan borrowers pay. Importantly, that rate is fixed, and would apply to the 10-year life of the loan.
"Additionally, the plan retains the current income-based repayment and forgiveness option to ensure that loans are affordable even if a borrower's financial circumstances change. All federal student loan recipients can lower their monthly payments by extending the life of the loan to 25 years and capping them at 15 percent of discretionary income. If after 25 years, the borrower still has unpaid debt, that debt is forgiven in its entirety. If the borrower chooses, however, he or she can convert the loan back to the 10-year repayment schedule at any time and pay the balance off sooner.
"I did not support another short-term extension, which allows all rates to revert to 6.8 percent after two years, even the rates for subsidized loans.
"Further, this plan imposes permanent tax increases to pay for a temporary extension. For example, more than half the cost of the extension will be raised by forcing a higher tax on retirement accounts, including traditional IRAs, which many seniors depend on. Raising taxes for a short-term patch is not the way to address the problem.
"We need to come together to forge a bipartisan plan that will benefit students, not just in the short term, but over the long term in a fair and sustainable way."