Washington, D.C. — Carmel Martin, Executive Vice President for Policy at the Center for American Progress, and Anne Johnson, Director of Generation Progress, responded today to the efforts by a bipartisan coalition in the U.S. Senate to reach a compromise to reduce student-loan interest rates, which doubled on subsidized Stafford student loans on July 1.
Under the new compromise plan, interest rates on both subsidized and unsubsidized Stafford loans to undergraduate students would be tied to market rates with an add-on of 2.05 percent. Rates on these loans would be set at the time the loan is taken out, fixed for the duration of the loan, and capped at 8.25 percent to guard against future increases in market rates. The plan takes a similar approach to Stafford loans for graduate students, which would have a 3.6 percent add-on and a cap of 9.5 percent, and PLUS loans, which would have a 4.6 percent add-on and a 10.5 percent cap.
Carmel Martin, Executive Vice President for Policy at the Center for American Progress, released the following statement:
We are encouraged by the efforts of a bipartisan group in the Senate to reverse the doubling of interest rates that took effect on July 1, providing relief to millions of students who rely on federal loans to pay for college. There is no better investment we can make as a nation. The compromise also puts in place a framework that will ensure that future borrowers are not exploited by the student-loan program by charging interest rates that have no relationship to rates paid by consumers in the market. There is much more work to be done to ensure that all students in America can afford a college education, but keeping rates manageable is the least we can do to keep college affordable and reduce the burden of student debt.
Anne Johnson, Director of Generation Progress, released the following statement:
For the millions of young Americans and families worried about how they’ll pay for college this fall, today’s student-loan deal in the Senate is long overdue. After a frustrating political back-and-forth, Democrats and Republicans have come together to put college affordability first and give families the peace of mind they need. The deal, while not perfect, will protect future borrowers against rate spikes and lower rates immediately for the 11 million students and families who count on federal student loans to help pay for college. Our work on addressing the more than $1.2 trillion in student-loan debt is not done, but today’s deal is a critical step, and we urge Congress to move quickly to get this done.
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