Now is the time to give young people the certainty and savings they need on student loans.
Thanks to students and young people around the country making their voices heard, both parties have come together on a compromise that will save billions of dollars this year alone for the 11 million students who are counting on federal student loans to help them and their families pay for college.
Under the compromise reached by senators in both parties, interest rates on both subsidized and unsubsidized Stafford loans to undergrads would be tied to market rates with an add-on of 2.05 percent and a cap of 8.25 percent to guard against future increases in market rates. Additionally, by setting the interest rate at the time the loan is taken out, and keeping it fixed for the duration, this new framework will give students and families the certainty they need as they plan for the future.
The plan takes a similar approach to Stafford loans to graduate students, which would have a 3.6 percent add-on and a cap of 9.5 percent, and PLUS loans, which would have a 4.6 percent add-on and a 10.5 percent cap.
On July 1, interest rates doubled from 3.4 percent to 6.8 percent on the student loans that have made a tremendous difference in helping millions of young people pay for a college education. Low-income students simply cannot afford a hike in college costs—and that’s exactly what would happen if nothing were done and we let rates stay doubled. The compromise would save the average undergraduate taking out loans this fall nearly $1,500 over the life of that loan and the bill would be retroactive to July 1.
This week, the Senate has a chance to take action by passing the Bipartisan Student Loan Certainty Act. Our generation knows the value of a college education: college graduates are nearly twice as likely to find a job as those without a degree.
Our economy needs the next generation of workers to be both educated and on firm financial footing so that they can fully contribute to the economy. The $1.2 trillion in existing student debt Americans are carrying is already having major impacts—including on our housing market and on consumer spending—and we cannot wait any longer.
Passing this bill would be a major step forward on student loans, and it would set the stage for the larger conversation we need on how to address the factors contributing to rising college costs and increased debt. Standing in the way of this bill would leave 11 million students taking out loans this fall with a three-percent hike on their loans and add $14 billion to the profits the federal government is already making on student loans this year.
Young people need the certainty and savings that this bill will bring to student loans and college affordability. Now it’s time for Congress to act.