U.S. Senator Tom Udall issued the following statement about the automatic interest rate hike on new subsidized federal undergraduate Stafford loans, which went into effect today, doubling the interest rate on these loans.
"I am very disappointed that this increase went into effect. It happened despite efforts to work for a compromise - because Congress was unable to reach agreement to extend the lower rate. For thousands of New Mexico students, grants and loans make the difference between being able to attend college and not. Especially when the economy in New Mexico - and around the country - is still recovering, this isn't the time to add a new barrier to students seeking a college degree. I'm going to keep working to find a compromise that will retroactively hold these rates in check."
Udall last week joined 34 of his colleagues in introducing legislation that would cancel the hike and fix Stafford loan interest rates at 3.4 percent for new loans for one year. The fully paid for Keep Student Loans Affordable Act of 2013 (S. 1238) would allow Congress time to work on a long-term and sustainable approach for the federal student loan program. The compromise would save new undergraduate borrowers at New Mexico universities an average of almost $1,000 over the life of their loans.
The bill was necessary because negotiations with Senate Republicans broke down after Republicans blocked legislation to maintain the low student loan interest rates for two years, instead offering legislation with increasing interest rates that would exacerbate student debt loads.
The Keep Student Loans Affordable Act of 2013 is fully paid for by closing a loophole that currently allows those who inherit certain IRAs and 401(k)s to avoid paying the taxes on those accounts for many years. The bill does not create a new tax, it would simply cap the amount of time payment of taxes can be delayed at five years.
Udall has long said he wants to see student loan rates considered in a comprehensive way, through reauthorization of the Higher Education Act, to make college more affordable for all families and find a long term solution that will help New Mexico students.
Last year, Udall also voted to extend the subsidized rate for new Stafford undergraduate loans for one year, in order to give Congress time to work on the broader issue. Udall has also supported several bills in the last two years to maintain the subsidized rate on new undergraduate student loans.