House Approves Foxx Legislation to Provide Long-Term Certainty for Student Loan Interest Rates

Campaign Promises, Political Posturing Should Not Influence Student Loan Interest Rates

WASHINGTON, D.C. – Congresswoman Virginia Foxx (R-NC) today issued the following statement upon the passage of the Smarter Solutions for Students Act (H.R. 1911) from the House of Representatives. Foxx, who chairs the House of Representatives Subcommittee on Higher Education, cosponsored the measure with Education Committee Chairman John Kline (R-MN):

“Campaign promises and political posturing should not play a role in the calculation of student loan interest rates. As we’ve seen, Washington’s involvement in the rate-setting equation is a recipe for uncertainty and confusion. Borrowers deserve better. The Smarter Solution for Students Act puts an end to the temporary fixes that have failed to strengthen our nation’s student loan system and offers simplicity, rate caps and an assurance that interest rates are immediately in line with the free market – a need particularly acute in this jobless economy.

“If President Obama and Senate Democrats are serious about a long-term solution to the student loan interest rate problem, they will immediately consider and build on the ideas put forth in the Smarter Solutions for Students Act . Students, families and taxpayers deserve certainty, not more can-kicking from Washington.”

The Smarter Solutions for Students Act returns student loan interest rates to a market-based system in order to strengthen federal student loan programs and better serve borrowers and taxpayers.  Under H.R. 1911, and like President Obama’s proposal, interest rates on subsidized and unsubsidized Stafford loans will be calculated using a formula based on government’s borrowing rate, the 10-year Treasury Note.

In 2007, the Democrat-led Congress passed legislation that temporarily lowered interest rates on subsidized Stafford loans made to undergraduate students from 6.8% to 3.4% over four years.  The lower interest rate was extended for a year in anticipation of the July 1, 2012 expiration.  However, rates for new subsidized Stafford Loans are scheduled to double on July 1, 2013, to 6.8% unless a long-term solution is enacted. The Smarter Solutions for Students Act is that long-term solution.

H.R. 1911 provides long-term predictability for students and borrowers by ending the cycle of short-term fixes and looming deadlines in Congress. 

The Washington Post in its editorial “Reforming Student Loans is Off to a Good Start” said of a long-term, market-based solution, “there’s no reason to delay passing such a policy.”

Congresswoman Foxx and Chairman Kline wrote an editorial in today’s Washington Times entitled, “Getting politics out of student loans.” Excerpts are below:

• “By tying rates to the market, the Smarter Solutions for Students Act sets a predictable formula for interest-rate calculations, insulated from the politics and posturing of Washington.  Additionally, we protect students from high interest-rate environments by imposing a fair and reasonable cap.”

• “It will put an end to the quick fixes and campaign promises that have failed to strengthen our nation’s student-loan system. Our proposal offers predictability, simplicity and the flexibility to take advantage of low interest rates whenever possible.  In fact, should this legislation be enacted this summer, most student-loan borrowers will see their interest rates drop as much as 2 percentage points.  It’s a win for students and a win for taxpayers.”

• “Students deserve a long-term solution that gets Washington out of the business of setting student-loan interest rates. Fortunately, President Obama agrees.  In his budget for the next fiscal year, the president offered a plan to tie rates to the free market.”