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Nelson renews call for Congress to cut student loan interest rates

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Move comes as feds prepare to increase rates for second straight year

U.S. Sen. Bill Nelson (D-FL) is renewing his call on Congress to take up and pass legislation he filed to cut federal student loan interest rates and allow borrowers with existing loans to refinance those loans to a new lower rate.

The move comes as the federal government prepares to increase federal student loan interest rates for the second year in a row.

“Higher education is becoming unaffordable for low- and middle-income individuals, and the federal government shouldn’t be putting it further out of reach,” Nelson wrote in a letter to the leaders of the Senate Health, Education, Labor, and Pensions (HELP) committee today. “I strongly urge you to include S. 1521, the Student Loan Relief Act of 2017, as part of any upcoming Higher Education Act (HEA) reauthorization to help provide some much-needed relief to both future and past student borrowers across the country.”

Starting July 1, interest rates for new undergraduate student loans will be 5.045 percent, up from 4.45 percent this year. For graduate students, rates will increase to 6.595 percent, up from 6 percent. And rates for Federal PLUS loans be 7.595 percent, up from 7 percent.

Nelson filed legislation last summer to cap federal student loan interest rates for undergraduate students at 4 percent, graduate students at 5 percent, and PLUS loans at 6 percent. The legislation is currently pending before the Senate HELP committee.

More than 43 million Americans currently have outstanding student loan debt. In Florida alone, students graduating with a four-year degree leave college with more than $24,000 in student loan debt on average. Federal student loan interest rates are set annually, with new rates taking effect on July 1 of each year.

Under current law, federal student loan interest rates are fixed for the lifetime of the loan and cannot be refinanced, even if rates go lower. Nelson says lowering the interest rate caps and allowing borrowers to refinance their existing loans would help make higher education more affordable for students across the country.

A copy of the letter Nelson sent to the HELP committee today to urge them to take up and pass his bill is available here.

A copy of Nelson’s bill is available here.

Recent background article on the upcoming rate hikes:

Interest rates on federal student loans to rise again this year

By Michael Stratford
05/09/2018 01:29 PM EDT

The cost of borrowing money from the federal government to pay for college is set to increase for the second year in a row.

The interest rates on new federal student loans for the coming academic year will jump by more than half of a percentage point following the Treasury Department’s sale today of 10-year notes, which is the government security to which the rates are tied.

For new undergraduate student loans, the interest rate will increase to 5.045 percent, up from 4.45 percent.

The rate on direct loans for graduate students will rise to 6.595 percent from this year’s 6 percent.

And the interest rates on federal PLUS loans — both for graduate students or parents paying for their children’s education — will be 7.595 percent, up from the current 7 percent.

The new interest rates take effect on July 1 for the 2018-2019 school year and are fixed for the lifetime of the loan.

The changes don’t affect borrowers who already have federal student loans.

$220 Million Settlement with Bank for Manipulating Interest Rates

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Attorney General Pam Bondi today announced a $220 million multistate settlement with Deutsche Bank for fraudulent conduct involving the manipulation of LIBOR. LIBOR is a benchmark interest rate that affects financial instruments worth trillions of dollars and has a widespread effect on global markets and consumers. By manipulating LIBOR, Deutsche Bank defrauded government entities and not-for-profit organizations in Florida and throughout the U.S. out of millions of dollars.
The investigation, conducted by a working group of 45 state attorneys general, revealed that Deutsche Bank manipulated LIBOR in a number of ways. Deutsche Bank employees improperly made internal requests for LIBOR submissions to benefit Deutsche Bank’s trading positions. Deutsche Bank also attempted to influence other banks’ LIBOR submissions in a manner intended to benefit their trading positions. Lastly, Deutsche Bank received communications from inter-dealer brokers and external traders attempting to influence Deutsche Bank’s LIBOR submissions. At times, Deutsche Bank LIBOR submitters and supervisors expressly acknowledged and indicated they would work to implement the requests received.
Deutsche Bank employees had strong reason to believe that these LIBOR submissions did not reflect the true borrowing rates pursuant to published guidelines. Additionally, the LIBOR rates the bank submitted did not reflect the actual borrowing costs of Deutsche Bank and other panel banks. Even though these rates are material terms of LIBOR-referenced transactions, Deutsche Bank employees did not disclose these facts to the governmental and not-for profit counterparties who executed the transactions with the bank.
Governmental and not-for-profit entities with LIBOR-linked swaps and other investment contracts with Deutsche Bank will be notified if they are eligible to receive a distribution from the settlement fund of more than $213 million. The balance of the settlement fund will be used to pay costs and expenses of the investigation and for other uses consistent with state laws.
As part of the settlement, the Florida State Board of Administration is receiving more than $10 million and other Florida counter-parties are receiving a total more than $5 million.
To view a copy of the settlement, click here.
Deutsche Bank is the second of several USD-LIBOR-setting panel banks under investigation by the state attorneys general to settle. In August, 2016, the states settled with Barclays Bank PLC and Barclays Capital Inc. Deutsche Bank is cooperating with the investigation. The investigation into the conduct of several other USD LIBOR-setting panel banks is ongoing.