Rep. Courtney Statement as 2020 Treasury Auction Sends Federal Student Loan Rates to Historic Lows
NORWICH, CT – Congressman Joe Courtney (CT-02), a senior member of the House Education and Labor Committee, released the following statement today regarding the U.S. Treasury Department’s annual sale of 10-year notes, which has resulted in the lowest federal student loan interest rates since 2005. The new interest rate on federal student loans will fall by 1.779% from their current levels, and will be set at 2.75% on undergraduate Federal Direct Stafford loans; 4.30% on graduate Federal Direct Stafford loans; and 5.30% on Federal Direct PLUS loans (including Graduate PLUS and Parent PLUS loans). The federal student loan interest rate is calculated annually, as mandated by the bipartisan Student Loan Certainty Act of 2013. The new rate will go into effect for new loans disbursed between July 1, 2020 and June 30, 2021.
“With all the economic uncertainty brought on by COVID-19, a drastically low 2.75% interest rate on an investment in your own earning potential is a major boost, and a huge opportunity,” said Congressman Courtney. “For new students and their families, this is outstanding news. But under current law, existing student-loan borrowers are blocked from accessing the historically low rates afforded to new students.
“All across the country, families with mortgages, people with car loans, and other loan-holders are refinancing their loans down to today’s lower rates. They’re doing the right thing—this pandemic has caused real economic turmoil, and these folks deserve the chance to refinance. However, federal student loan borrowers are barred from using these same financial tactics to save themselves money each month and over the life of their loan. If you bought a house, you can refinance; if you purchased a new motorcycle, you can refinance; but if you invested in training for a new career, or for a degree, you’re getting left out. My bicameral bill, the Bank on Student Loan Refinancing Act, was introduced to give family borrowers the same sort of refinancing options available in other markets, but it’s clear that during the COVID-19 crisis we’ve got to do more to make sure that all student loan borrowers—including Millennial and Gen Z graduates, who are just beginning to enter the workforce—are able to take advantage of this new 2.75% rate. They need this assistance now more than ever, and we’ll be introducing new legislation in the coming weeks that will help get it to them.”
The federal student loan interest rate is calculated annually, as mandated by the Student Loan Certainty Act of 2013. In 2013, Rep. Courtney helped to shepherd the Student Loan Certainty Act through the House Education and Labor Committee, and towards passage in the House of Representatives by an overwhelmingly bipartisan margin of 392-31. The bill was passed to repeal a fixed interest rate of 6.8% on federal Stafford student loans, which had been put into law in the 1990s. The law replaced that fixed rate with a formula that resets the interest rate on federal student loans annually. The new rate is calculated annually based on the high yield of the final 10-year Treasury Note auction held each year in May, plus an add-on of 2.5% for undergraduate Direct Stafford loans; 3.6% for graduate and professional Direct Stafford loans; and 4.6% on Direct PLUS loans.
In March of 2019, Rep. Courtney reintroduced the bicameral Bank on Students Emergency Loan Refinancing Act (H.R. 1707) along with Senator Elizabeth Warren (D-MA). The bill would allow federal student loan borrowers to refinance their loans down to lower, more competitive rates that were previously offered in the 2016-2017 school year. According to estimates from the Department of Education, about 25 million borrowers would be likely to refinance under that legislation, and borrowers would save thousands of dollars over the life of their loan.
Check back for more information on Rep. Courtney’s new legislation to give parity to federal student loan borrowers, and to allow them to refinance down to the new 2020 rate.