What is S. 1238?
(Updated July 13, 2017)
S. 1238 would expand the low interest rate for some student loans to more students by amending Title IV of the Higher Education Act.
The loans in question are Direct Stafford loans, which are currently being offered to students with a 3.4 percent interest rate. But this rate has so far only been applied to students who received loans between July 1st, 2011 and July 1st, 2013. If passed, this bill would extend the low interest rate to undergraduates who received loans between July 1st, 2011 and July 1st, 2014.
This bill also has a provision that has nothing to do with education. If S. 1238 is enacted, it would change the requirements for how much money an employee with a tax-exempt pension plan has to give back to the state if that employee has died. This amendment is aimed at making sure the beneficiaries of the deceased employee — their spouse or a disabled/chronically-ill dependent — don’t get locked into a burdensome annuity contract with an insurance company.
Argument in favor
Maintaining low interest rates for student loans will allow millions of youth to afford a college education for another year while members of Congress hammer out a more permanent deal.
Argument opposed
This is a stopgap measure that allows Congress to continue dawdling on this issue, leaving millions of students anxiously waiting to see whether they’ll be able to afford a full college education.
Impact
Current and prospective college students, their parents and guardians, institutions of higher education, insurance companies, banks, Direct Stafford Loans, the Higher Education Act, the Internal Revenue Code, spouses and dependents of employees with tax-exempt pensions.
Cost of S. 1238
A CBO cost estimate is unavailable. However, a Bloomberg article on the bill cites an estimated cost of $22 billion over 10 years as reported by Senate aides.
Additional Info
Of Note:
Last year Congress voted to slash the interest rate on student loans from 6.8 percent to 3.4 percent — a significant reprieve for millions of college-bound youth. Supporters of this bill argue that this represents an overdue concession to college students, who last year contributed $51 billion to the federal government through their loans.
Opponents of this bill argue that it hinges almost entirely on increasing taxes on the wealthy. An alternative bill was introduced around the same time as S.1238 that would allow loan rates to fall for several years before they’re allowed to climb again without a cap.
One fact few people dispute is that student debt, a product of loans, is on the rise. Today there are almost 20 percent more young adults with student debt than there were 10 years ago, with a hefty increase in debt size.
Media:
Co-Sponsoring Sen. Jack Reed (D-RI) Press Release
Bloomberg (Cost Estimate)
Committee on Education and the Workforce Democrats
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