August 09, 2013
WASHINGTON, D.C. – President Barack Obama today signed into law the Bipartisan Student Loan Certainty Act, a bill coauthored by U.S. Senator Angus King that lowers student loan interest rates for all students who have taken out or will take out a loan after July 1, 2013. Senator King attended the White House signing ceremony this afternoon.
“I am pleased to see this bill, which has broad bipartisan support in both the House and Senate, signed into law by the President,” Senator King said. “Legislators on both sides of the aisle put politics aside to forge a solution for America’s students, and in doing so, set an example of how government should work. I am proud to have been a part of the process, and I am also proud to say that as a result of this legislation, all students who are taking out loans this summer will enjoy lower interest rates while future borrowers will be protected by caps if rates were to rise in the future. It is a fair deal for students and a fair deal for the American taxpayers who are projected to save $715 million over the next 10 years.
“With the student loan debate settled, it is time to look forward to addressing the ever-rising cost of higher education. Providing a solid education for our students is the best investment we can make in our nation’s future, and I hope Congress will look to seriously address that issue as we reauthorize the Higher Education Act next year.”
The Bipartisan Student Loan Certainty Act, which Senators King, Joe Manchin (D-WV), Tom Carper (D-DE), Richard Burr (R-NC), Tom Coburn (R-OK), Lamar Alexander (R-TN), and Tom Harkin (D-IA) crafted, requires that, for each academic year, all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency.
The resulting interest rates for loans taken out after July 1, 2013, would be 3.86% for subsidized and unsubsidized loans for undergraduate students, 5.41% on unsubsidized loans for graduate students, and 6.41% on PLUS loans for parents and graduate students. These rates would apply retroactively to newly issued loans taken out after July 1, 2013. The interest rate would be fixed over the life of the loan to provide borrowers with certainty to plan for the future.
Additionally, this bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25% for undergraduate students, 9.5% for graduate students, 10.5% for PLUS borrowers.
The Congressional Budget Office has determined this legislation would save students $30 billion over the next four years and save taxpayers $715 million over the next ten years.