Last week I joined a group of senators in introducing a bipartisan solution to lower interest rates for 100% of newly issued student loans. Interest rates on 40% of loans that students will take out to pay for college next year doubled on July 1, and absent legislation like the Bipartisan Student Loan Certainty Act, Congress will be leaving these students high and dry.
The agreement I unveiled with a bipartisan group of five other senators is very much like the proposal passed by the Republican U.S. House of Representatives, as well as a proposal by the president. It would save billions of dollars in interest payments for all 11 million students taking out student loans this year by dropping rates on all student loans, and protect taxpayers by ensuring that rates reflect the cost of borrowing in the market.
Our legislation would establish the interest rate for all newly issued student loans based on the U.S. Treasury 10-year borrowing rate, plus an additional percentage, based on the type of loan, to cover administrative costs. The interest rate would be fixed over the life of the loan. This would save students money now, but would also ensure that in the future, loan rates reflect the market—it is fair to students, and it is fair to taxpayers.
These loans are substantial for both students and taxpayers. Among the students from Tennessee and all over the country who recently graduated high school, nearly two-thirds of them will go to college next year. Taxpayers help many of them afford a college education through taxpayer-subsidized student loans, and it would amount to $133 billion in student loans this year.
U.S. Senators Joe Manchin (D-W.Va.) Richard Burr, (R-N.C.), Tom Coburn (R-Okla.), Angus King (I-Maine) and Tom Carper (D-Del.) cosponsored this legislation with me. Despite this bipartisan legislation, Democrats in the Senate majority introduced a short-term fix for only 40% of the loans taken out over the next year.
Not only would that plan leave the rest of the borrowers high and dry, but the proposal raises taxes to do it—and it’s unconstitutional since it is a revenue bill originating in the Senate.
And because Congress could not reach an agreement by the end of June, interest rates have gone up on students. If Congress doesn’t act, loans will remain at the higher rate. Our legislation would be a permanent fix for all students who take out federal loans, and it should be an area where the U.S. Congress can find broad agreement.
I think we should show these students that we support them. Instead of leaving them high and dry, we should be congratulating them—and giving them their ticket to the middle class.