WASHINGTON, DC – In an effort to protect taxpayers and prevent the interest rate on need-based student loans from doubling on millions of Americans, U.S. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, today joined 38 Senate Democrats to introduce a fully paid for bill to lock in the rate at 3.4 percent for one year.
The Keep Student Loans Affordable Act of 2013 (S. 1238) will secure the low interest rate for an additional year as Congress works on a long-term and sustainable approach for the federal student loan program.
Earlier this month, Senate Republicans blocked legislation to maintain the low student loan interest rates for two years, and instead are pushing legislation with ballooning interest rates that would increase student debt and make it harder for middle-class families to afford college.
The current 3.4 percent interest rate on subsidized federal Stafford loans is set to double on July 1, unless Congress acts. This rate hike would add about $1,000 of additional debt on the average student over the life of the loan. If enacted, the Keep Student Loans Affordable Act of 2013 would retroactively set the interest rate for any subsidized Stafford loan made between July 1, 2013 and June 30, 2014 at 3.4 percent. The bill is fully paid for by closing a loophole that currently allows those who inherit certain IRAs and 401(k)s to avoid paying the taxes on those accounts for many years. The bill does not create a new tax - it would simply cap the amount of time payment of taxes can be delayed at five years.
“There is no question that Congress must take a comprehensive look at student loan programs, and as Chairman of the Senate HELP Committee, I plan to do so in the reauthorization of the Higher Education Act next year. However, rushing through a short-sighted, long-term proposal that will burden millions of future college students and their families with higher, unrestricted interest rates—and ask these same students to pay additional interest to reduce the deficit—is simply not right or fair,” Senator Harkin said. “The Keep Student Loans Affordable Act of 2013 offers a short-term, fully-paid-for extension that is a much more viable and responsible path forward to keep student loan rates affordable in the coming school year for millions of middle-class students and their families.”
“We need to keep student loans affordable, but we must not sell out our students and make them mortgage their future to afford college. Both parties agree on the need for a comprehensive overhaul to make our financial aid system more effective, affordable, and sustainable. But Republicans see the deadline as a chance to cram through a long-term bill that would keep rates low for a year or so but then in successive years make college more expensive for working families. They have blocked legislation to keep rates low and want to do away with important safeguards for students and their families. The American people can’t afford that. The Keep Student Loans Affordable Act is a fiscally responsible, short-term solution to keep rates low now and build long-term consensus as Congress does the work necessary to address the bigger picture of college affordability,” said Senator Jack Reed.
“Students in North Carolina and across the country cannot afford more student loan debt. And they certainly cannot afford congressional inaction,” said Senator Kay Hagan. “I am disappointed that a compromise on a long-term solution that could pass the Senate was not reached before the July 1 deadline, but I refuse to sit on my hands while 176,000 North Carolina students and their families see interest rates double on their federal Stafford loans. I am proud to introduce this bill with Senator Reed to keep student loans affordable. I am hopeful we can work towards a long-term plan, but in the meantime I am committed to working with my colleagues – Democrats and Republicans – to pass this legislation and avoid putting one more burden on our students and middle class families who are trying to make ends meet.”
“Countless students at schools in Minnesota—and across the country—demonstrate tremendous perseverance in getting a college education and in cobbling together the resources to pay for it,” said Senator Al Franken. “If Congress doesn’t act, paying for college is only going to get harder, which is why this legislation to prevent this rate hike is so crucial.”
“Within days, student loan interest rates will double. I am hopeful that we will find a broad solution that keeps rates low, reduces the outstanding debt burden that is crushing our students, and makes college more affordable. But next year’s students do not have time to wait for Congress to get its act together. They need us to stand up for them today. This compromise proposal does just that, and is a critical first step toward a long-term solution that solves our country’s student debt problem,” said Senator Elizabeth Warren.
“At a time when many families are struggling to make ends meet, we need to be making college more affordable, not raising rates so the government makes a profit off of students,” said Senator Debbie Stabenow. “Allowing student loan rates to double could put the dream of a college education out of reach for millions of Americans. This legislation keeps rates where they are for one year while Congress works on a more comprehensive plan to make college more affordable for all.”
The Keep Student Loans Affordable Act of 2013 is authored by U.S. Senators Jack Reed (D-RI) and Kay Hagan (D-NC) and cosponsored by Harkin along with: Al Franken (D-MN); Debbie Stabenow (D-MI); Elizabeth Warren (D-MA); Patty Murray (D-WA); Harry Reid (D-NV); Mary Landrieu (D-LA); Mark Pryor (D-AR); Dick Durbin (D-IL); Sheldon Whitehouse (D-RI); Tom Udall (D-NM); Amy Klobuchar (D-MN); Sherrod Brown (D-OH); Bob Menendez (D-NJ); Patrick Leahy (D-VT); Bernie Sanders (I-VT); Jeanne Shaheen (D-NH); Brian Schatz (D-HI); Carl Levin (D-MI); Mazie Hirono (D-HI); Claire McCaskill (D-MO); Chris Murphy (D-CT); Richard Blumenthal (D-CT); Tammy Baldwin (D-WI); Mark Begich (D-AK); Martin Heinrich (D-NM); Kristen Gillibrand (D-NY); Ben Cardin (D-MD); Jeff Merkley (D-OR); Jay Rockefeller (D-WV); Ron Wyden (D-OR); Barbara Boxer (D-CA); Barbara Mikulski (D-MD), Bill Nelson (D-FL), Tim Johnson (D-SD), Bob Casey (D-PA), and Chris Coons (D-DE).