Recently, the Federal Reserve Bank of New York estimated that Americans' outstanding student loan debt stands at nearly $1 trillion. As more students set their sights on an undergraduate or post-graduate degree to compete in today's job market, that figure is expected to rise. In this week's edition of the Taxpayer's Tab, NTUF summarizes how the current federal student loan system works, and offers some insight into how policymakers' attempts to reform it might affect the federal budget.
Featured bills this week include:
- H.R. 1433/S. 707, the Student Loan Affordability Act, was introduced by Congressman Joe Courtney (D-CT) and Senator Jack Reed (D-RI). It would extend the current interest rate on certain types of federal student loans through the 2014/2015 academic year. CBO estimated it would increase spending by $2.1 billion per year, or $8.3 billion over four years.
- Senator Reed also introduced S. 953, which would extend the current 3.4 percent interest rate until July 2015, but also includes some revenue provisions to make up the budgetary deficit. Under BillTally rules, it was also scored as a $2.1 billion per year increase in outlays.
- Representative John Tierny (D-MA) and Senator Elizabeth Warren (D-MA) sponsored H.R. 1979/S. 897, the Bank on Students Loan Fairness Act, which would authorize the Federal Reserve to help subsidize new loans. A cost estimate isn't yet available.
- Senator Tom Coburn (R-OK) introduced S. 682/S. 1003, the Comprehensive Student Loan Protection Act, to index the student loan interest rate to the rate on U.S. Treasury notes (plus a certain percentage). CBO estimated it would increase outlays by $6.4 billion per year over the first 5 years, but then result in average savings of $7.9 billion per year over the next six.
- Representative John Kline's (R-MN) Smarter Solutions for Students Act, H.R. 1911, would also index interest rates according to U.S. Treasury notes, capped at a certain amount depending on the type of loan. It would increase spending over the first 5 years, but decrease it by $3.7 billion over ten.