FOR IMMEDIATE RELEASE:
July 24, 2013
With Skyrocketing Interest in Years to Come, Senate Passes a Deal Students Can’t Afford
[Washington, DC] — Today, the Senate passed a deal, 81 to 18, making permanent changes to student loans, creating low rates next year at the expense of higher rates in just a few years. The deal locks in a projected $184 billion in profit off of students and families for the federal government, plus an additional $715 million in profit to use specifically for deficit reduction. It caps how high rates can go, but those caps still allow rates to rise too high. By 2015, graduate students could be paying more than 6.8 percent interest. By 2017, undergraduates could be paying more than 6.8 percent interest. That means the deal would codify a worse deal for students and families than the undesirable status quo.
The Senate-approved bill ties student loan interest rates to the 10-year Treasury note, allowing rates to rise with interest rates in the general economy. Interest rates on subsidized Stafford loans are pegged to the 10-year Treasury note, plus 2.05 percent. Interest rates for graduates are pegged to the 10-year Treasury note, plus 3.6 percent. PLUS loan borrowers will see their rates pegged to the 10-year Treasury note plus 4.6 percent. There are three different high caps: an 8.25 percent cap for undergraduates, a 9.5 percent cap for graduates, and a 10.5 percent cap for PLUS loan borrowers.
Senators Reed and Warren introduced an amendment that would have lowered the cap on undergraduate loans and PLUS loans to 6.8 percent and 7.9 percent, respectively, but the amendment failed 46 to 53. Senator Sanders introduced an amendment that would have sunsetted the proposal in 2015, before interest rates rise above 6.8 percent, which failed 34 to 65.
Rory O’Sullivan, Policy and Research Director of Young Invincibles, said:
“Tonight, Senators who supported the deal simply weren’t listening to students. We know that Senators are under tremendous political pressure to get a deal. Unfortunately, students will pay the price for this misunderstood political victory in higher interest rates in just a few years. Our generation is not so myopic that we don’t see the impact on our younger brothers and sisters.
“We were encouraged by the two amendments that would have made the deal better for students, and applaud Senators Reed, Warren, Sanders, and their co-sponsors for their hard work. We look forward to working with members of Congress and the Administration to address rising student debt and the unsustainable cost of college through the Higher Education Act Reauthorization. It’s our hope that our voices are heard more clearly in that debate.”
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.