WASHINGTON - Over the last few weeks, we've all probably known a family member, friend or neighbor that has watched a child graduate from high school or college. While it is an exciting time for parents and graduates, it also comes with a whole host of new concerns, the chief among them is affording the next step in a young person's life.
As your member of Congress, I have the opportunity to meet high school and college students from across the 3rd Congressional District both in Missouri and in our nation's capital. These young people were very much on my mind prior to a recent vote in Congress because of their concerns about how to afford college and how to manage government loans they receive after they graduate.
The current problem facing these students and their parents is that interest rates on student loans will double in less than a month - the result of a broken process that allows politicians to set interest rates and make paying for college even harder for students and families. Student loan interest rates are slated to increase from 3.4 percent to 6.8 percent on July 1.
With that in mind, I voted in favor of the Smarter Solutions for Students Act that will stop student loan interest rates from doubling by tying them to a market-based rate. This bipartisan solution fixes the student loan process long-term and takes politicians out of the business of setting interest rates. It also protects the program by setting the rates at a level that will allow the programs to be more self funding rather than have the taxpayers keep subsidizing its losses. In fact, it mirrors the market-based plan offered by the president in April.
The bill calculates subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury Note plus 2.5 percent. It would also calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury note plus 4.5 percent. Student loan interest rates would reset once a year, allowing rates to move with the free market. This legislation could lead interest rates to drop by as much as two percent for millions of borrowers this summer.
Both the House and the president agree that a permanent, market-based system is needed to strengthen and protect the student loan program. This bill gives American students and taxpayers the responsible solution they deserve.
The legislation now awaits Senate action and I am hopeful they will act quickly so we can help our students and their parents. With the current state of the economy, our students and post-graduates need certainty of their student loan interest rates.
Getting Congress out of the business of setting student loan interest rates and instead letting the free market set them will, in my opinion, strengthen federal student loan programs and serve the best interests of both borrowers and taxpayers.
U.S. Rep. Blaine Luetkemeyer, R-Mo., represents the 3rd District, which includes Jefferson City. His local office call be reached at 573-635-7232.