Hoeven: Senate Passes Bipartisan Student Loan Certainty Act
House Also Expected to Approve by August
WASHINGTON – Senator John Hoeven today announced that in a bipartisan show of support, the Student Loan Certainty Act that he is cosponsoring has passed the U.S. Senate. The new legislation provides a long-term remedy for the program and incorporates caps to ensure that loan rates remain at affordable levels. The measure will reduce loan rates for 100 percent of borrowers. The vote was 81 to 18.
In addition to Hoeven, prime sponsors of the bill include Senators Joe Manchin (D- W.Va.), Lamar Alexander (R-Tenn.), Richard Burr (R-N.C.), Tom Carper (D-Del.), Tom Coburn (R-Okla.), Dick Durbin (D-Ill.), Tom Harkin (D-Iowa), and Angus King (I-Maine).
The Bipartisan Student Loan Certainty Act will 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 will 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 will be locked in for the life of the loan.
For example, borrowers this academic year will 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 will be capped. The rates can 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 will have a second safety net in addition to the rate caps because their loan payments will 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 bipartisan legislation is a long-term fix that will give virtually all students a lower rate,” Hoeven said. “Just as important, we now have a bill that I believe the House will pass and the president will sign by August, giving students the certainty of knowing they will have access to affordable rates for the coming school year.”
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