My immigrant parents taught me that there is no surer pathway to success than a good education. I am grateful that, by coming to the United States, they made this opportunity available to me; it’s a privilege to be working in the White House to make higher education available to every American willing to work for it. And as I am about to have two daughters in college at the same time, it’s clear to me that if a college degree is really going to be available to all families, we must make sure students and their families don’t leave college saddled with a mountain of debt.
This afternoon, President Obama made an important step toward that promise by signing into law the bipartisan student loan interest rate compromise, which advances our nation's commitment to students by cutting rates on nearly all new loans this year – saving a typical undergraduate student $1,500 over the life of his or her loans. This legislation allows borrowers to benefit from the low interest rates currently available in the marketplace, guarantees that borrowers are able to lock in these rates over the life of their loans, and protects future borrowers by capping how high rates can rise.
The signing of this legislation is a key victory for students, one in which Members of Congress from both sides of the aisle came together around the important mission of keeping college affordable for American students and their families.
Under the new law, nearly 11 million borrowers will see their interest rates decrease on new loans made after July 1, 2013. About 8.8 million undergraduate borrowers will see their rates on new loans drop from 6.8 to 3.86 percent, and about 1.5 million Graduate Unsubsidized Stafford borrowers will see their rates drop on new loans from 6.8 percent to 5.41 percent. Finally, over 1 million Grad PLUS and Parent PLUS borrowers will see their rates on new loans drop from 7.9 percent to 6.41 percent—the first reduction in years.
As President Obama has repeatedly stated, higher education cannot be a luxury for a privileged few: it is an economic necessity that every family should be able to afford, and that every young person with dreams and ambition should be able to access. This bill reaffirms our commitment not just as Democrats or Republicans but as Americans – that we share in a promise that all of our citizens can go as far as their talent and hard work will take them. Making higher education more affordable is a critical part of keeping that promise, and we can’t let high borrowing costs prohibit students from accessing higher education and pursuing their piece of the American dream.
While this plan represents an important next step for students and families, it is abundantly clear that we need to do more. Already, President Obama has made historic investments in college affordability through the expansion of the Pell Grant program, student loan reform and the creation of the American Opportunity Tax Credit. In the weeks and months to come, the Administration will continue to work with Democrats and Republicans in Congress to tackle rising college tuition and unaffordable debt, forging ahead on the important work of putting higher education in reach for every American.
Cecilia Muñoz is Assistant to the President and Director of the Domestic Policy Council. You can follower her on Twitter @Cecilia44. Click here to learn more about the new student loan interest rate law.