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Groups Blast Proposal that Pays Down Deficit On the Backs of Students

July 17, 2013

Young Invincibles Contact:
Colin Seeberger

U.S. PIRG Contact:
Christine Lindstrom

New Student Loan Interest Rate Proposal Adds $715 Million in Government Profit to Pay Down the Deficit On the Backs of Students

[Washington, DC] – Reports are out today that the White House and key Senate negotiators met earlier this week to discuss a new proposal for setting student loan interest rates after rates on federal subsidized Stafford loans doubled from 3.4 percent to 6.8 percent on July 1, which negatively impacted over 7 million student loan borrowers who are largely from low-income backgrounds. The new proposal would use the student loan program to reduce the deficit by $715 million.

The plan would peg interest rates on subsidized Stafford loans to the 10-year Treasury note, plus 2.05 percent. Interest rates for graduates would be pegged to the 10-year Treasury note, plus 3.6 percent. PLUS loan borrowers would see their rates pegged to the 10-year Treasury note plus 4.6 percent. There are three different caps: an 8.25 cap for undergraduates, a 9.5 cap for graduates, and a 10.5 cap for PLUS loan borrowers.

The government is already projected to make $184 billion in profit from borrowers over the next decade. The proposed deal would lock in these profits on future generations of borrowers. Below is a statement from Young Invincibles and U.S. PIRG.

“The proposal now being considered by Congress and the White House threatens our students’ futures for the sake of deficit reduction and is a step backward for America’s economic competitiveness. At a time when low income borrowers have just seen their rates double, and when the country already holds over a trillion dollars in student debt, this new framework makes college even more expensive and uses revenue to reduce the deficit on the backs of students who are already struggling. Instead of focusing on coming up with a solution that will be good for students,some policy makers are hard at work to make things even worse than the 6.8 rate we now face, and to make more money off of students for government coffers.”


Young Invincibles is a national organization committed to amplifying the voices of young Americans, aged 18 to 34, and expanding economic opportunity for our generation. Young Invincibles ensures that young Americans are represented in today’s most pressing societal debates through cutting-edge policy research and analysis and innovative campaigns designed to educate, inform and mobilize our generation to change the status quo.

U.S. PIRG, the federation of state Public Interest Research Groups, is a consumer group that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.