URBANA — Standing in the University of Illinois Illini Union and flanked by students who receive federal student loans, U.S. Sen. Dick Durbin urged the House of Representatives to take up new legislation that proposes to cap loan rates.
On Wednesday, the Senate passed the Bipartisan Student Loan Certainty Act, which calls for linking student loan interest rates to financial market rates. It also proposes caps of 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for parent PLUS loans. The bill passed the Senate 81-18.
Previous measures that attempted to keep interest rates low on federal student loans had failed in Congress, prompting rates on new loans to automatically rise on July 1 from 3.4 percent to 6.8 percent.
The House could take up the bill next week, said Durbin, the No. 2 Democrat in the Senate.
"It's better than their bill. They don't want to go home with a school year starting and all these students wondering what their interest rates will be," he said.
The Senate's bill calls for student loans to be tied to the rates of 10-year U.S. Treasury bills. Loans taken out after July 1 would carry rates of 3.86 percent for subsidized and unsubsidized loans for undergraduate students, 5.41 percent for unsubsidized graduate students and 6.41 percent for PLUS loans. The borrowing rates would be determined by the last auction held before June of each year, not the changing daily rate.
"We don't know if interest rates will go up or down, that's why we wanted caps," Durbin said.
The rates would be proactive to July 1 and would be fixed over the life of each loan, according to Durbin.
'It's about people'
University of Illinois Provost Ilesanmi "Ade" Adesida said the bill appears to be mostly concerned with numbers and figures such as bond yields, but "it's about people ... about ensuring a college education remains affordable and accessible." As a public land grant institution, which promises educational opportunities for all, "this bill has a special resonance at Illinois," he said.
In the 2011-2012 school year, 18,024 UI students took out federal direct student loans, including subsidized, unsubsidized and Parent Plus loans, according to UI Director of Financial Aid Dan Mann. Of the graduating seniors who took out loans, the average debt is $24,657, up from $17,058 five years ago.
Student loan debt, Durbin said, has surpassed credit card debt in the U.S., totaling over $1 trillion.
For Collin Friedemann, a soon-to-be UI senior from Philo, the accessibility of affordable loans will play into his decision on the timing of when he goes to graduate school. The linguistics major is interested in a career in international relations. Friedemann's father died of brain cancer earlier this summer, drastically cutting into the family's income. He is working on campus this summer and will take out federal student loans.
"I don't want my mother to have to work for another 20 years" in order to pay for his college education, he said.
On Friday, U.S. Rep. Rodney Davis, R-Taylorville, released a statement saying he was pleased with the Senate's action this week and he would support the legislation "as soon as it is brought up for a vote in the House."
The legislation "takes Congress out of the business of setting student loan rates by moving federal student loans to a market-based interest rate and provides some much-needed, long-term certainty to students and their families," Davis said.
If the passes in the House, Durbin said, he expects President Barack Obama to sign the bill.
Durbin, the assistant majority leader in the Senate since 2006, has not made an official announcement about his candidacy in 2014.
"But I hope you can tell by my activities and fundraising I'm making every preparation to be on the ballot in 2014," Durbin said.
Durbin first won the Senate seat in November 1996 and was re-elected in 2002 and 2008.
He sits on the Senate judiciary, appropriations, foreign relations and rules committees.
Durbin also said he was not interested in any Cabinet positions in the Obama administration.
"Not true at all. I've got a much better job," he said.