[Congressional Record Volume 159, Number 64 (Wednesday, May 8, 2013)]
[Senate]
[Pages S3260-S3261]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mr. Durbin):
  S. 909. A bill to amend the Federal Direct Loan Program under the 
Higher Education Act of 1965 to provide for student loan affordability, 
and for other purposes; to the Committee on Health, Education, Labor, 
and Pensions.
  Mr. REED. Mr. President, I am pleased to introduce the Responsible 
Student Loan Solutions Act with Senator Durbin to offer a long-term 
approach to setting student loan interest rates.
  Congress must take swift action to prevent the doubling of the 
interest rate on need-based loans on July 1, 54 days away. We also need 
a new mechanism for setting interest rates on all federal student loans 
for the long term so that students and taxpayers are protected, and we 
need to take the time to get it right.
  In April, I introduced the Student Loan Affordability Act to keep the 
rate on subsidized loans at 3.4 percent for the next 2 years. This 
would give Congress time to debate a long-term solution as part of the 
reauthorization of the Higher Education Act.
  Today, I am introducing legislation with Senator Durbin and 
Congressman Tierney and Congressman Courtney to overhaul the mechanism 
for setting the interest rates on federal student loans. Instead of 
setting a numerical rate in law, which quickly becomes out of sync with 
the economic and interest rate environment, or locking borrowers into a 
fixed rate with no opportunity to refinance when rates drop, our 
proposal will offer adjustable rate loans for students and parents with 
the protection of a cap on the maximum interest rate that could be 
charged during periods of high interest rates.
  In today's low interest rate environment, the fixed rates for student 
loans are too high, resulting in student loans generating a profit for 
the Federal Government. If we would have maintained the variable rate 
for student loans that was in law before 2006, the interest rate for 
students in repayment on their loans would be 2.39 percent this year. 
At today's fixed rates, they will pay 3.4 percent for subsidized loans 
and 6.8 percent for unsubsidized loans. The Federal Government provides 
student loans to increase the number of Americans who attain college 
degrees, not to generate revenue. Yet, according to CBO estimates, the 
Federal Government will save more than 36 cents for every dollar lent 
in the student loan programs for fiscal year 2013. CBO projects that 
the student loan programs will continue to generate savings on the 
backs of students through fiscal year 2023. We need to change this.
  The Responsible Student Loan Solutions Act will offer adjustable rate 
loans for students and parents with a cap on the maximum interest rate 
that could be charged to protect borrowers during periods of high 
interest rates. Interest rates for need-based, subsidized loans will be 
capped at 6.8 percent. Rates for unsubsidized and parent loans will be 
capped at 8.25 percent. Rates will be set every year based on

[[Page S3261]]

the 91-day Treasury bill plus a percentage determined by the Secretary 
of Education to cover program administration and borrower benefits. The 
Secretary must set the rate so that the student loan programs are 
revenue neutral.
  The Responsible Student Loan Solutions Act will also correct an 
inequity for undergraduate students who qualify for subsidized loans. 
Currently, a dependent undergraduate student can borrow up to $31,000 
total. However, the maximum amount that can be subsidized is $23,000, 
which means that needy students often have to resort to more expensive 
unsubsidized loans to finance a part or the remainder of their 
education costs. The Responsible Student Loan Solutions Act will allow 
borrowers with demonstrated financial need to have up to the full loan 
limit in the lower cost subsidized program.
  Finally, the Responsible Student Loan Solutions Act will allow 
borrowers with high fixed-rate federal student loans to refinance those 
loans into the new variable rate loan with a cap. This could be a real 
help to borrowers trying to make ends meet, considering that, under 
current conditions, rates calculated under a bill would be much lower 
than the fixed rates for unsubsidized loans 6.8 percent, PLUS loans 
made under the old bank-based program, 8.5 percent, and PLUS loans made 
through the Federal Direct Loan program 7.9 percent.
  We need a multi-faceted approach to solving our student loan debt 
crisis, which reports from the Federal Reserve and others show is a 
drag on our economy. We cannot allow this generation of Americans to 
flounder, unable to buy a home or a car or secure credit or start a 
family under the weight of student debt.
  We need to keep rates low in the short term--that means taking quick 
action to keep the rate from doubling in July. It also means over the 
long-term, setting rates in a way that does not add to the growth of 
student debt. I encourage our colleagues to join Senator Durbin and me 
in cosponsoring the Responsible Student Loan Solutions Act to put in 
place a long-term approach to setting student loan interest rates that 
is fair to students and taxpayers. I also urge our colleagues to 
support taking immediate steps to reassure students and families that 
the rate on subsidized loans will not double this July.

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