WASHINGTON – Today, President Obama signed into law the bipartisan student
loan reform bill, sponsored by Sen. Tom Carper (D-Del.), which passed the Senate 81-18 on July 24. The legislation was also sponsored by Sens. Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-ME), Tom Coburn (R-OK), Tom Harkin (D-IA), Dick Durbin (D-IL), and Lamar Alexander (R-TN).
“The law that President Obama signed today will lower borrowing costs for all
students right away, while preventing rates from rising to unaffordable levels in the future,” said Senator Carper. “This bipartisan legislation sets reasonable caps on student loan interest rates, maintains protections for ‘the least of these’ in our society including low-income workers in Delaware, and ends the annual uncertainty that families have faced in determining how to pay for higher education. I’m glad that Congress was able to work together to institute these important reforms to our student loan programs. It’s my hope that students in Delaware and across the country will benefit from it for years to come as they pursue a higher education.”
The Bipartisan Student Loan Certainty Act requires that, for each academic year,
all newly-issued student loans be set to the U.S. Treasury 10-year borrowing rate (specifically, the yield on the 10-year note as determined by the last auction held before June of each year – not the changing daily rate) plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency. The resulting interest rates for loans taken out this year, 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. Additionally, the Congressional Budget Office has determined this legislation would save taxpayers $715 million over ten years.