Washington Update

Update on Undergraduate Student Loans Impending Interest Rate Increase

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Without intervention from Congress, the interest rate on federal student loans will increase from 3.4% to 6.8% on July 1, 2013. On May 23, 2013 the House took up and passed H.R. 1911, “Smarter Solutions for Students Act” as reported from the Committee on Education and the Workforce by a 221-198 vote. The House incorporated into H.R. 1911, H.R. 1949, “Improving Post-Secondary Education Data for Students Act,” also reported from the same Committee. The legislation directs the Secretary of Education to appoint a 15-member advisory committee on improving postsecondary education to report back in a year. The advisory committee is to conduct a study on the types of information that would be useful to students in making decisions about pursuing post-secondary education.

On June 6, 2013, it took two separate votes, each requiring a super majority of 60 votes, to successfully end debate over the two competing student loan bills.

The Democratic version, S. 953, the “Student Loan Affordability Act of 2013,” introduced by Sen. Jack Reed (D-RI), bypassed the committee process by being placed directly on the Senate calendar. This bill would extend the current 3.4% interest rate for two additional years, through June 30, 2015, and pays for the cost of this with revenue-raising provisions. The vote was 51-46 (remember 60 votes were necessary to proceed further on the bill).

The Republican version, S. 1003, “Comprehensive Student Loan Protection Act,” introduced by Sen. Tom Coburn (R-OK), was also introduced and placed directly on the Senate calendar. It sets the rate at that of the 10-year Treasury bill plus 3% (no offset is needed on this bill because, like the House bill, over a 10-year period it will actually raise money for the Treasury). The vote on this measure was 40-57.

As of this writing, there are no bipartisan agreements, but negotiations between the two chambers are ongoing. ADEA will update everyone as events warrant.

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