Today, Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Tom Harkin (D-IA)--working with U.S. Senators Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-ME), Tom Coburn (R-OK), Tom Carper (D-DE), Lamar Alexander (R-TN), and Dick Durbin (D-IL)--introduced a bipartisan compromise, the Bipartisan Student Loan Certainty Act, to lower interest rates for 100% of borrowers who have taken out, or will take out, a new federal student loan after July 1, 2013. As part of the bipartisan compromise, Senator Harkin secured caps on all loans, including an 8.25% cap on all undergraduate loans.
"I am pleased that this student loan compromise includes hard, front-end caps on interest rates--a feature that has historically been a part of the student loan program--to protect students and their families when interest rates rise," said Senator Harkin, who is the Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee. "Furthermore, this proposal will direct the Government Accountability Office to conduct a study on the true cost of the federal student loan program, to better inform our efforts as the HELP Committee moves towards the reauthorization of the Higher Education Act. Indeed, the upcoming reauthorization of the HEA will be a historic opportunity to get a handle on runaway college costs and stop the shifting of costs to students, and the HELP Committee will continue to hold hearings on these critical issues as we work to reauthorize HEA next year."
"When Democrats and Republicans work together and have a real debate on a real problem, we can come up with commonsense solutions that benefit all Americans," said Senator Manchin. "It is refreshing that on such an important issue we stopped playing politics with our students' future to come up with a bipartisan, permanent fix that lowers interest rates for all students, especially the poorest, while also putting in place strong protections to ensure that student loan interest rates never become unaffordable. I look forward to working on more bipartisan efforts in the future. When we put our country first, we can do the right thing."
"I am very pleased that we were able to come together to score a big victory for 100% of students and borrowers," said Senator Burr. "This bipartisan compromise puts in place a sustainable, market-based solution that ensures access and affordability for students seeking to improve their lives through higher education. I applaud my colleagues for their hard-work and commitment to put the well-being of the American people ahead of political interests."
"As elected officials we have a responsibility to work with one another to move the country forward, and today I am proud to say to the American people that we have done just that by bridging the partisan divide to act in the best interests of our nation's students," said Senator King. "I applaud my colleagues on both sides of the aisle for coming together to forge a long-term, market-based solution that will lower and cap interest rates for every student taking out a loan and finally get Congress out of the business of setting rates. This type of good faith, give-and-take compromise is exactly how Congress should work for the country."
"This compromise is a win-win for both students and taxpayers," said Dr. Coburn. "Tying interest rates to the market allows students to take advantage of historically low rates while ensuring taxpayers will not have to foot the bill for arbitrary rates set by Congress. I am pleased senators agreed on a permanent, principled solution instead of a short-term political fix."
"This bipartisan -- or really tri-partisan -- compromise represents the best of the Senate and should be a roadmap for how we do business around here. Republicans, Democrats and an Independent worked together, with input from the President and his team, to solve a problem facing millions of American students and their families," said Senator Carper. "The product is a common sense bill that lowers student loan interest rates immediately for all students and ends the annual uncertainty that families have faced recently when borrowing for college. Simply put, it's a good approach that will help low- and moderate-income students better afford college. It also wouldn't have happened without the work of some of my fellow "recovering governors' -- Senators Manchin, Alexander and King -- who consistently seek solutions over partisanship."
"This long-term, market-based solution means that interest rates on all undergraduate loans--which are two-thirds of all student loans--will be 3.86 percent this year," said Senator Alexander. "Rates on all other student loans will also be reduced. This saves billions of dollars for the 11 million students who will borrow money to go to college this year."
"This agreement will ensure students loan rates will fall below the 6.8 percent rate that kicked in on July 1," said Senator Durbin. "Once again we've shown that when both sides work together, we can reach fair and bipartisan solutions to some of the nation's biggest issues. Now that we've found a way to keep student loan rates low, I hope we can return to a more basic conversation about the underlying and unsustainable cost of education in America."
The Bipartisan Student Loan Certainty Act requires that, for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate (specifically, the yield on the 10-year note as determined by the last auction held before June of each year--not the changing daily rate) plus add-ons to offset costs associated with running the program.
The resulting interest rates for loans taken out this year, after July 1, 2013, would be 3.86% for subsidized and unsubsidized loans for undergraduate students, 5.41% on unsubsidized loans for graduate students, and 6.41% on PLUS loans for parents and graduate students. These rates would apply retroactively to newly issued loans taken out after July 1, 2013. The interest rate would be fixed over the life of the loan to provide borrowers with certainty to plan for the future.
Additionally, this bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25% for undergraduate students, 9.5% for graduate students, 10.5% for PLUS borrowers. The Congressional Budget Office has determined this legislation would save taxpayers $715 million over ten years.