WASHINGTON (5/24/13)--Legislation that would tie student loan interest rates to 10-year U.S. Treasury notes, and allow those student loan rates to reset each year, was passed by the U.S. House on Thursday.
The Smarter Solutions for Students Act (H.R. 1911) passed the House by a 221 to 198 vote.
According to a U.S. House release, H.R. 1911 would:
Calculate subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury note plus 2.5%;
Calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury note plus 4.5%;
Cap Stafford Loan interest rates at 8.5% and cap PLUS loans at 10.5%.
The bill will now move on to the Senate. The federal student loan rate is currently capped at 3.4%, and this limit will double to 6.8% on July 1 if Congress does not take action.
Other student loan fixes introduced in the House and Senate include:
The Student Loan Affordability Act (S. 953), which would cap federal student loan rates at 3.4% for another two years;
The Bank on Students Loan Fairness Act (S. 897), which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%; and
The Student Loan Fairness Act (H.R. 1330), which would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate.
Sen. Kirsten Gillibrand (D-N.Y.) this week also announced the Federal Student Loan Refinancing Act, which would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%.
The Credit Union National Association's first annual High School Student Borrowing Survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.
In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for an April 23 News Now
story: CFPB Seeks CU Help For Student Loan Issues.)