House Passes Student Loan Bill, So What's Next?

NEW YORK (MainStreet)—The House of Representatives passed, May 23, the Smarter Solutions for Students Act (H.R. 1911). This would tie interest rates to prevailing market trends. It will end federal rate subsidies.

The Act sets the annual interest rate on Direct Stafford loans and Direct Unsubsidized Stafford loans at the rate of high-yield 10-year Treasury notes plus 2.5%, but caps that rate at 8.5%. The annual interest rate on Direct PLUS loans will be at the rate of high-yield 10-year Treasury notes and an additional 4.5%, but caps that rate at 10.5%.

Also see: Can the Student Debt Crisis Outshine the Housing Bubble?

The bill was passed in the House of Representatives by a vote of 221-198. The vote was primarily party line with 217 of 225 Republicans (eight did not vote) voting for it and only four of 194 Democrats voting in favor (seven not voting). The bill was introduced by Rep. John Kline (R.-MN).

According to Kline's Education and the Workforce committee, organizations advocating passage include: the American Association of Community Colleges, the American Association of Collegiate Registrars and Admissions Officers, the American Association of State Colleges and Universities, the American Council on Education, Association of American Universities, Association of Jesuit Colleges and Universities Council for Christian Colleges & Universities, the Council of Graduate Schools Hispanic Association of Colleges and Universities, the National Association of Independent Colleges and Universities and the National Association of Student Financial Aid Administrators.

But not everyone thinks it is a smart idea.

Claire Law is the founder of Educational Avenues in Charleston, S.C. and an Independent Educational Consultant and a Certified Educational Planner (AICEP). She teaches courses about college admission and financial aid at the University California-Irvine and is the co-author Find the Perfect College for You (Supercollege, 2010).

"I think we have done this before," Law said, regarding the recent bill. "I personally think it is a temporary patch."