After weeks of negotiations, a bi-partisan group of U.S. Senators has reached agreement on new interest rates for student loans. The legislation, S. 1334, is headed for a vote by the full Senate either July 23 or 24. Once the Senate has acted on, and hopefully passed, the legislation, it is expected that the House will vote on the same measure.
The agreement, S. 1334, is not ideal, but it merits support. The interest rate on federal undergraduate loans—both subsidized and unsubsidized—would be set at the 10-year Treasury note plus 2.05 percentage points, while loans for graduate students would be set at 3.6 points above the Treasury rate, and loans for parents at 4.6 percentage points over the T-bill rate. The maximum rate would be capped at 8.25% for undergraduate loans, 9.25% for graduate student loans, and 10.25% for parent loans.
As of July 1, subsidized student loan interest rates increased from 3.4% to 6.8%. This new formula would lower the student and parent loan rates. We would have liked for loans to be less costly for students, particularly given the fact that more and more community college students are borrowing (with more defaulting), but this appears to be the best deal that could be made.
When S. 1334 is brought to the floor, an amendment will be offered by Senators Patty Murray (D-WA) and Al Franken (D-MN) that would take some of the budgetary savings from S. 1334 and direct them to two critically important purposes: 1) providing greater resources for the Pell Grant program; and 2) restoring ability-to-benefit student aid eligibility for students enrolled in career pathway programs. These represent two of AACC’s highest priorities and we urge you to contact your senators in support of the Murray-Franken amendment.
The amendment’s focus on ability-to-benefit (ATB) students is particularly welcome. ATB students are those who lack a high school diploma or G.E.D. and need to demonstrate their “ability to benefit” in order to receive federal student aid. New ATB students lost their eligibility as of July 1, 2012, as a result of legislative language put in earlier funding legislation. AACC and its members were outspoken about the need for these students to continue to receive support, and those calls have been heard. While this is not a full restoration of ATB eligibility, it will provide eligibility for thousands of our students.
Therefore, we urge you to contact your senators ASAP and ask them to vote for S. 1334, and especially for the Murray-Franken amendment.
For more information, contact David Baime, Jim Hermes, or Laurie Quarles.