Bipartisan Student Loan Certainty Act of 2013by Representative Peter A. DeFazio
Posted on 2013-07-31
DeFAZIO. Mr. Speaker, today I will vote for H.R. 1911, the
Bipartisan Student Loan Certainty Act of 2013. Due to congressional
inaction student loan rates doubled to 6.8% on July 1st. This is not
the bill I would've written but it was necessary to come to an
agreement so that today's students don't see their interest rates
double. It would have been my preference to pass the legislation
introduced by Senator Elizabeth Warren that gives students the same low
interest rates that the Federal Reserve grants Wall Street banks.
With passage of H.R. 1911, this year's students will only pay a 3.8% interest rate when they go back to school in the fall. This rate will be locked in for the entire life of their loan. Although the interest rates will likely increase for future students under this bill, they should remain below the current 6.8% for the next few years. This is a short term solution to the long term problem of rising college costs and increasing student debt. I stand ready to work with my colleagues to address the issue of college affordability including student loan interest rates in the upcoming reauthorization of the Higher Education Act.
Mrs. McCARTHY of New York. Mr. Speaker, as you may know, on July 1st the rate for subsidized Stafford student loans doubled from 3.4% to 6.8%. Today, students already face over $1 trillion in student loan debt nationally and any effort to further indebt hardworking students and families would be disgraceful. This Congress needs to act in a responsible fashion in order to help alleviate the cost prohibitive status of higher education in this country. Today, I am pleased to say that this Congress has acted to help students and families by putting forward H.R. 1911, the Bipartisan Student Loan Certainty Act of 2013, legislation that I am proud to support.
Unlike the proposals floated earlier this Congress by the House majority, this bill offers students and families a reasonable way to finance higher education. As opposed to rates that fluctuate throughout the life of the loan, H.R. 1911 allows for a variable rate for new borrowers that adjusts yearly but is fixed for the life of the loan once borrowed. Further, the bill offers lower interest rates for undergraduate borrowers of subsidized and unsubsidized Stafford loans by pairing them to the 10 yr Treasury (T) bill + 2.05% as opposed to the 10 yr T bill + 2.5% in the original House majority proposal. Lastly, the bill offers interest rate caps for borrowers to ensure that interest [[Page H5221]] rates do not soar to undesirable levels in the years to come.
If this bill is signed into law, rates on new subsidized Stafford and PLUS loans will go down this year. Undergraduates would borrow at 3.86%, a cut from 6.8%, graduate students would borrow Stafford loans at 5.4%, a cut from 6.8% and parents and graduates borrowing PLUS loans would borrow at 6.4%, a cut from 7.9%. For a freshman undergraduate beginning school this year and taking out the maximum amount of loans, he/she will save $3,300 in interest payments over their college career as compared to current law and undergraduate students would save $25 billion in debt relief, according to CBO projections, over the next five years as compared to current law. While this bill represents a significant improvement for students, I do have reservations that the undergraduate interest rate cap, currently set at 8.25%, is too high. While it is widely believed that students will enjoy low rates in the short-term, there is a strong possibility that rates will skyrocket as our national economy improves. I believe that, for undergraduates, a lower cap should be considered and I would welcome its continued review by this Congress in the years to come.
Overall, Mr. Speaker, this is a good bill that will give students and families alike significant financial relief and stability in the years to come.
Mr. GENE GREEN of Texas. Mr. Speaker, I rise today to express my opposition to the Motion to Concur in the Senate Amendment to H.R. 1911, the Smarter Solutions for Students Act.
This bill returns federal student loans to a system of market-based variable rates, an imprudent policy that seeks profits for deficit reduction at the expense of students struggling with the substantial and climbing cost of post-secondary education.
While the bill may appear to reverse the interest rate hike that occurred on July 1, setting rates at 3.8 percent for this year and 4.6 percent for next year for undergraduate Stafford student loan borrowers, it is essentially a bait and switch that will pile extra debt onto students when the current record-low rates inevitably rise.
This is unacceptable. Student loan debt is a major drag on the American economy, reaching $1 trillion and climbing, and recently surpassing credit card debt as the largest form of consumer debt. Approximately 60 percent of students take out loans to attend college, and increasing the costs of borrowing will prevent millions from being able to pursue higher education.
While the interest rate caps are a step in the right direction, they are too high to meaningfully protect students when the temporarily low rates give way to rates that are even higher than the 6.8 percent rate this bill attempts to fix.
College educated students are the future engine of our country, and anyone who wants to pursue a post-secondary education should have the opportunity to do so without going into crushing debt. I urge my colleagues to vote against this legislation and instead, extend the current interest rate of 3.4 percent until Congress enacts a true long- term solution to the cost of college that is worthy of our Nation's young people.
The SPEAKER pro tempore. The question is on the motion offered by the gentleman from Minnesota (Mr. Kline) that the House suspend the rules and concur in the Senate amendment to the bill, H.R. 1911.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds being in the affirmative, the ayes have it.
Mr. GEORGE MILLER of California. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further proceedings on this motion will be postponed.