Butterfield Opposes Bill to Increase Student Loan Interest Rate, Supports Bill to Provide Students Financial Relief
WASHINGTON, DC – Congressman G. K. Butterfield (NC-01) took to the House floor today to voice his strong opposition to the Republican-led “Making College More Expensive Act” that would change the interest rates for all new federal student loans made on or after July 1, 2013, from a fixed interest rate to a variable market-based interest rate. Presently, the interest rate for subsidized loans is 3.4 percent, however, the rate is scheduled to double to 6.8 percent after July 1 if Congress does not act.
Butterfield said, “Instead of considering freezing current rates or enacting comprehensive reforms, House Republicans want to tie student loan rates to the free market. We are still recovering from the devastating results of adjustable interest rates with home mortgages, but Republicans want to do the same with student loans. Allowing these rates to fluctuate with the market increases uncertainty and exposes students to significantly higher student loan costs. Our students deserve better.”
Under the bill, interest rates for all new subsidized and unsubsidized student loans would be based on the interest rate on a 10-year Treasury note plus 2.5 percentage points, with a cap of 8.5 percent. The interest rate for all new GradPLUS and parent loans would be based on the interest rate on a 10-year Treasury note plus 4.5 percentage points, capped at 10.5 percent. The bill also would eliminate the cap on interest rates for all new consolidation loans originated on or after July 1.
In light of this, Congressman Butterfield has cosponsored H.R. 532, the Private Student Loan Bankruptcy Fairness Act of 2013. H.R. 532 would restore fairness in student loan lending by allowing a common consumer protection, applied to other private debts, to be extended to private student loans. Under current law, private education loans are not dischargeable in bankruptcy. The Private Student Loan Bankruptcy Fairness Act of 2013 would eliminate that provision and treat student loans equally with other traditional debts such as car loans and home mortgages.
“A post-secondary education is essential to securing gainful employment in the United States. The cost of attending college continues to rise and for many people, financing their education with loans is the only option. Student borrowers that are forced into bankruptcy should get relief from their private student loans to escape the threat of lifelong indebtedness.”
According to the Consumer Financial Protection Bureau, outstanding student loan debt in the United States topped $1 trillion in 2011 -- including approximately $150 billion of private student loan debt. Unlike federal student loans, which can have flexible repayment options for borrowers and limits on interest rates, private student loans have no protections and no caps on the total amount a student can borrow.
Butterfield’s Floor remarks can be seen here.