House Committee Advances Bill Changing Student Loan Interest Rates
The House Education and the Workforce Committee today approved a bill that would change the financing of college student loans and, according to the Congressional Research Service, make it more expensive for students to borrow.
The Smarter Solutions for Students Act (H.R. 1911), supported by House Republicans, would tie student loan interest rates to the 10-year Treasury note, plus 2.5 percent for both subsidized and unsubsidized Stafford Loans. (For more background, see Politics K-12.)
The proposal is intended to address the automatic interest rate hike from 3.4 percent to 6.8 percent on subsidized student loans that will kick in if Congress fails to act by July 1.
On Wednesday, the nonpartisan CRS issued a memo analyzing the impact of the bill and described the additional cost that students would face if the proposal were to become law. The CRS outlined examples of the costs with different scenarios. It found, for instance, that students who borrow the maximum amount of $27,000 of unsubsidized and subsidized Stafford Loans over five years would pay $12,374 in interest under H.R. 1911, or $10,867 in interest under current law if rates are allowed to double to 6.8 percent, or $7,033 if rates stay at 3.4 percent.
The new proposal would also impact borrowing fees for loans parents take out. The CRS estimates that a parent who borrows the maximum amount of $40,000 in PLUS loans for their child would pay $27,680 in interest under the Republican bill, more than the $21,654 in interest under the current law.
During the markup today, committee Democrats Rep. Joe Courtney, D-Conn., and John Tierney, D-Mass., offered amendments to keep interest rates at 3.4 percent and give lawmakers additional time to seek a long-term solution to address student loans and college affordability, but the proposals did not advance.
Today, the committee also approved The Improving Postsecondary Education Data for Students Act (H.R. 1949), which would establish an advisory committee to study what factors would be useful to students and families in the college-search process.