New America's Delisle Proposes Alternative Solution in Student Loan Debate

Would cut interest rates for nearly all borrowers, requires no new funding
Published:   May 24, 2012

The U.S. Senate plans to vote today on two proposals to maintain the 3.4 percent interest rate on some student loans for one year. Majority Leader Harry Reid (D-Nev.) says the bills will not pass because Republicans and Democrats cannot agree on how to pay for the $6 billion needed to extend the rate.

This impasse is unnecessary, says Jason Delisle, director of the Federal Education Budget Project at the New America Foundation, who has detailed a proposal whereby Congress could cut interest rates and debt burdens for nearly all federal student loan borrowers without requiring new funding or revenue.

In a series of posts on the Ed Money Watch blog, Delisle shows that linking fixed student loan interest rates to the rates on 10-year U.S. Treasury notes would allow undergraduates to leave school with less debt than even a permanent extension of the 3.4 percent interest rate. And it requires no new funding. The plan more than pays for itself, according to the Congressional Budget Office, reducing the budget deficit by $52 billion over 10 years.  

To read more about the proposal, click here. For more on the budget implications of the proposal, click here.

To schedule an interview with Jason Delisle, please contact Clara Hogan.