As discussion about the student debt crisis returns to the national stage with Stafford loan interest rates set to double again on July 1, three Republican senators—Sen. Tom Coburn (R-O.K.), Richard Burr (R-N.C.), and Lamar Alexander (R-TN)—have introduced the Comprehensive Student Loan Protection Act, which proposes to provide a solution to the fluctuating interest rates on federal student loans.
The legislation seeks to set fixed interest rates on newly-issued federal student loans, including Subsidized, Unsubsidized, Stafford, Graduate, and Parent PLUS loans. The interest rate would be pegged to the U.S. Treasury 10-year borrowing rate, plus an additional three percentage points. The bill includes the addition of the three percentage points in order to “partially offset the costs associated with defaults, collections, delinquencies, deferments, forgiveness, and other market uncertainties.”
Coburn argues that this legislation takes a market-driven approach that would provide a more lasting solution to changes in federal student loan interest rates. Sen. Alexander echoed Coburn’s remarks.
“Instead of short-term, expensive fixes that only help a few students who have federal loans…this bill will tie all interest rates to the market through a simpler, fairer system that lowers costs for students who take out federal loans to pay for college next year and saves taxpayer dollars,” Alexander said.
A similar approach was recently proposed by House Education and the Workforce Committee Chairman John Kline (R-Minn.) in a recent hearing to discuss college costs. But some student advocates have voiced hesitation.
Ethan Senack, higher-education fellow for the U.S. Public Interest Research Group, emphasized the importance of capping the maximum rate on student loans to ensure that any bill passed "is good for students now, and good for students down the road."
The bill comes at a time of increased debate about the best approach to reducing the burden of student loans. To learn more about Campus Progress's campaign to tackle educational debt, visit www.itsourinterest.org or join the conversation on Twitter with the hash tag, #ItsOurInterest. Or, use the form below to share your story with us!