Senate approves student loan interest rate bill. On Wednesday, the Senate approved the Bipartisan Student Loan Certainty Act by a vote of 81 to 18. House leadership has promised swift approval of the legislation, with a vote in the House likely this week. The bipartisan proposal would tie interest rates on undergraduate subsidized and unsubsidized Stafford loans to the 10-year Treasury note plus 2.05 percentage points for undergraduates, and plus 3.6 percentage points for graduate loans. This translates into an interest rate of approximately 3.86% for undergraduate students for the coming year, higher than the 3.4% rate that lapsed on July 1, but certainly more manageable than the current 6.8% rate. Graduate students would have access to loans at 5.4%, and parents would be able to borrow at 6.4%. The interest rates would apply retroactively to loans taken out since July 1, 2013. The compromise does include caps on interest rates for these loans—8.25% for undergraduate students, 9.5% for graduate students and 10.5% for PLUS loans for parents. The compromise proposal also calls for a broader government study of college costs, at the request of Education Committee Chair Tom Harkin (D-IA). Harkin did suggest the rates could be revisited as Congress begins to address the reauthorization of the Higher Education Act, saying the results of the proposed study on college costs would provide important context. Harkin said Wednesday that “this discussion will continue” next year when the Higher Education Act comes up for reauthorization. The Congressional Budget Office estimates the value of the proposal at about $700 million. Sixteen Democrats voted against the bill. The plan does not address the $1 trillion in student loan debt that already exists. It does not address the growing cost of a college degree. It does not reduce the billions of dollars in profit they say that the government earns from these loans. And it establishes a rate-setting system that will probably lead to higher rates. “My colleagues who support this proposal say that it will lower interest rates on loans for this year—and that’s all that matters,” said Sen. Elizabeth Warren (D-MA). “Now, that’s the same thing credit card companies said when they sold zero-interest credit cards, and it’s the same thing subprime mortgage lenders said when they sold teaser-rate mortgages. In all of these cases, the bill comes due.” Warren introduced an amendment with Sen. Jack Reed (D-R.I.) that would cap the new interest rates at the current rates. That amendment failed. So too did an amendment introduced by Sen. Bernard Sanders (I-Vt.) that would have authorized the new rates for just two years.
Democrats resist House education bill. Democrats and the Obama administration lashed out against the GOP proposal to reform national education policy and change the provisions of No Child Left Behind. Education Secretary Arne Duncan said the bill “marks a retreat from high standards for all students and would virtually eliminate accountability for the learning of historically underserved students—a huge step backward for efforts to improve academic achievement.” Senate Democratic leadership said it would not consider the bill in the Senate. On July 19, the House passed the Student Success Act (H.R. 5). The bill, a departure from the policies of No Child Left Behind, would reduce the federal role in public education and cede back to states decisions about how to deal with failing schools, how and whether to evaluate teachers, and how to spend much of the money sent by Washington to educate poor, disabled and non-English-speaking students. The bill would eliminate the current accountability system, called adequate yearly progress, and would allow states to develop their own academic standards in reading, math and science, and leave to their discretion whether to set standards for other subjects. The bill also would allow states to identify their poorest-performing schools and let local districts develop their own strategies for improving them. The bill consolidates multiple programs into a Local Academic Flexible Grant, which would allow states and school districts to support their own priorities. The proposal would prohibit the education secretary from pushing for states to adopt the common core standards. The White House issued a veto threat against the bill on July 17. In the Senate, the Health, Education, Labor and Pensions Committee approved its own reauthorization bill (S. 1094) on June 12.
As a member of New England Council, we publish the DC Shuttle each week featuring higher ed news from Washington. This edition is drawn from the Council’s Weekly Washington Report Higher Education Update, of July 29, 2013.
Founded in 1925, the New England Council is a nonpartisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England formed to promote economic growth and a high quality of life in the New England region. The Council’s mission is to identify and support federal public policies and articulate the voice of its membership regionally and nationally on important issues facing New England. For more information, please visit: www.newenglandcouncil.com.
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