Congress left town for the Fourth of July recess with no resolution on extending the current rates for new subsidized and unsubsidized Stafford student loans. The House passed their version of legislation in June, but the Senate still working on consensus and waiting for a CBO score on one proposal, had not scheduled floor time for a vote before they adjourned. Because of the lack of agreement between the House and Senate, on July 1, the interest rates for those taking out federal student loans doubled to 6.8 percent, an increase from 3.4 percent, adding about $1000 to the overall cost of the average student loan.
Despite their lack of agreement on a path forward, both chambers do agree that this should be addressed, especially given the impact of high student debt on future growth of the US economy. Getting there however, is another story as the House and Senate have little success thus far in reaching agreement on major pieces of legislation. In May, the House passed the Smarter Solutions for Students Act (H.R. 1911) by a vote of 221-198 which bases student loan interest rates to market-based rates. Subsidized and unsubsidized Stafford loan calculations would be based on a 10-year Treasury note, in addition to 2.5 percent for undergraduates, 4.5 for graduate students. Once a year, student loans would be reset based on the current market. The legislation includes a cap of 8.5 percent for Stafford loans and PLUS loans would be capped at 10.5 percent.
The Senate will return next week and we anticipate a vote Thursday, July 10, on two proposals. The first is would retroactively extend the lower rate of 3.4 percent for one year, allowing lawmakers time to work on a long-term solution for student loan interest rates. Senator Patty Murray (D-WA) along with 34 Senate Democrats introduced the bill Keep Student Loans Affordable Act. The second was recently introduced by a group of bipartisan Senators. The Student Loan Certainty Act ties student loan interest rates to a 10-year Treasury note and adds an additional 1.85 percent to Stafford loans. The proposal would add 3.4 percent to graduate loans and 4.4 percent for PLUS loans.
While home for the 4th of July recess, our congressional delegation has been busy highlighting this issue. Yesterday, Senator Patty Murray, Representatives Jim McDermott, Rick Larsen, Suzan DelBene, Denny Heck and Derek Kilmer joined students at the University of Washington calling on Congress to extend student loan rates. Today Senator Murray and Congressman Larsen are meeting with students in Everett to discuss the impacts.
We will keep you posted as the debate continues votes begin next week. In the meantime have a happy and safe 4th of July.