Hoeven Announces Bipartisan Compromise on Student Loan Certainty Act
Changes Broaden Support, Enhance Prospects for Passage
WASHINGTON – Senator John Hoeven today announced that a compromise has been struck on the Bipartisan Student Loan Certainty Act that he is cosponsoring. The amended legislation will incorporates caps to ensure that loan rates don’t exceed affordable levels. The measure will reduce loan rates for 100 percent of borrowers.
In addition to Hoeven, prime sponsors of the bill include Senators Joe Manchin (D- W.Va.), Lamar Alexander (R-Tenn.), Kelly Ayotte (R-N.H.), Richard Burr (R-N.C.), Tom Carper (D-Del.), Tom Coburn (R-Okla.), Johnny Isakson (R-Ga.), and Angus King (I-Maine).
The Bipartisan Student Loan Certainty Act would tie all federal student loan rates to the 10-year U.S. Treasury note rate to reflect current market and employment conditions. Specifically, the bill would take the rate for 10-year Treasury notes, which this year would be 1.81 percent, and add fixed percentages to undergraduate, graduate and PLUS loans. Rates would be locked in for the life of the loan.
For example, borrowers this academic year would be able to lock in the following rates:
- Undergraduate loans: 1.8% + 2.05% = 3.86%
- Graduate loans: 1.8% + 3.6% = 5.4%
- PLUS loans: 1.8% + 4.6% = 6.4%
In the future, even if the Treasury note rate increases, the student loan rates would be capped. The rates could never exceed 8.25 percent for undergraduate loans, which represent 80 percent of all student loans. The cap for graduate school loans is 9.5 percent and the cap for PLUS loans is10.5 percent.
Student borrowers would have a second safety net in addition to the rate caps because the loan payments would also be effectively capped at the Income-Based Repayment level, which limits student loan payments to 15 percent of income, and forgives any remaining balance after 25 years.
“This compromise represents a big step forward for students and families,” Hoeven said. “Speaker Boehner has indicated that the House plans to take up the bill soon after the Senate passes it, meaning the legislation could become law before August, giving students the certainty of knowing they will have affordable rates for the coming school year.”
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