Senate’s Solution to Student Loan Rates Makes Potential Even Higher

(Senator Debbie Stabenow press release, July 27, 2013)

Legislation to tie student loan rates to market rates passed the Senate today by a vote of 81-18.  Students have paid an interest rate of 3.4% since 2011, but those rates expired as of July 1 and rates automatically doubled to 6.8%. The proposal passed by the Senate today could lead to rates jumping up to 7.25% or higher over the next few years.

Senator Debbie Stabenow voted against the legislation.

Earlier this month, Senator Stabenow sponsored legislation to retroactively freeze the student loan rate at 3.4% from July 1 of this year through June 30 of 2014, to give Congress an additional year to work on a comprehensive solution to the problem of growing student loan debt.  Her proposal won a majority vote 51-49, but was blocked by a Republican filibuster.

“I’ve taken a close look at this proposal and the bottom line is by the time a freshman entering school this fall becomes a senior, her rates could nearly double,” Stabenow said.  “I could not vote to put students in this position.  I will continue to fight for a comprehensive solution to the problem of growing student loan debt and will continue to do all I can to make college education more affordable.”

The proposal the Senate passed today would peg the student loan interest rate to the 10-year Treasury bill so that it would fluctuate with the cost of Treasury notes.  That would cause 2013 rates to jump to 3.9% this year, higher than last year’s 3.4%.  Rates are then projected to steadily increase each year, with rates hitting 7.25% by 2018.

In Michigan, nearly 300,000 students will be hit with higher loan costs than they paid last year. The average student debt for Michigan students is approximately $26,000.

To read previous stories about the progression of the student loan legislation, see

http://oaklandcounty115.com/2013/07/14/higher-student-loan-rates-stay/

http://oaklandcounty115.com/2013/07/08/stabenow-wednesday-vote-could-lower-student-loan-rates-video/