After months of debate, the Senate yesterday passed a bill that would create a long-term market-based interest rate solution for all federal student loan borrowers. The Bipartisan Student Loan Certainty Act passed the Senate by a vote of 81 to 18 and would have a retroactive effective date of July 1, 2013.
The deal reached in the Senate marks a long-awaited compromise by Senate Republicans, Democrats, and the Obama Administration. Under the act interest rates would be based on the 10-year Treasury bill plus the following percentage add-ons:
• 2.05 percent for undergraduate Stafford (subsidized and unsubsidized)
• 3.6 percent for graduate Stafford
• 4.6 percent for PLUS (parents and graduate students)
In addition, the deal includes caps: 8.25 percent for undergraduate Stafford; 9.5 percent for graduate Stafford; and 10.5 percent for PLUS. Loans would be “variable-fixed,” meaning students would receive a new rate with each new loan, but then that rate would be fixed for the life of the loan.
"The bill that is before us represents a number of compromises that were made on both sides," said Sen. Tom Harkin (D-IA) the chairman of the Health, Education, Labor and Pensions Committee, acknowledging the bipartisan effort that went into crafting this deal.
Speaking from the Senate floor, Sen. Lamar Alexander (R-TN) called the bill a “victory for students” and added that it makes student loans “simpler, cheaper [and] fairer.”
NASFAA President Justin Draeger issued a statement of support when the Senate compromise was initially reached.
The bill will now go back to the House for consideration, where it is expected to pass. At NASFAA's National Conference last week in Las Vegas, Department of Education officials made clear that should an interest rate deal be reached, schools would not be responsible for any reprocessing. In addition, new Master Promissory Notes (MPN) would not be issued since MPNs do not include interest rates.
Publication Date: 7/25/2013