Servicemember Student Loan Affordability Act

Floor Speech

Mr. DURBIN. Mr. President, we've made a lot of progress over the past couple weeks helping our Nation's students borrow at reasonable costs for their higher education needs. This year alone, students are projected to borrow $21 million in federal student loans. Borrowers currently carry about $1.1 trillion in student loan debt.

Several Federal programs help borrowers having trouble keeping up with student loan debt. Two programs in particular are designed to recognize the sacrifice made by those who serve our country--whether it's in the military or through public service.

The Servicemember Civil Relief Act protects our servicemembers from interest rates above 6% on all loans--including student loans taken out preservice--while they are on active duty. The Public Service Loan Forgiveness program encourages people to become public servants by forgiving student loan debt after 10 years of public service--including military service. Under this program borrowers must enroll in a qualifying repayment plan and make 10 years of payments while working in public service before the loan is forgiven.

To be eligible, borrowers with Perkins or Federal Family Education Loans must consolidate their loans into a Direct Consolidation Loan to be eligible for the Public Service Loan Forgiveness program. However, there's an unintended consequence at play here.

Once a servicemember consolidates his or her preservice loans to qualify for the Loan Forgiveness program, those loans no longer qualify for the 6 percent rate cap under the Servicemember Civil Relief Act. This is because consolidation or refinancing of old debt is considered a new loan under the Servicemember Civil Relief Act.

Unfortunately, this forces servicemembers to choose between the 6 percent rate cap now while they are on active duty and enrolling in a program that will forgive their loans after 10 years of service and steady payments. Furthermore, this quirk in the law prevents servicemembers from taking advantage of historically low interest rates by refinancing. A lower interest rate could save borrowers thousands of dollars over the life of the loan.

Congress' intent was to help servicemembers burdened with student loan debt, and the Servicemember Civil Relief Act and the Public Service Loan Forgiveness Programs have done that. But forcing servicemembers to give up the rate cap today for a chance to earn loan forgiveness in the future is not what Congress intended, and we should fix it.

This week I introduced the Servicemember Student Loan Affordability Act. This bill would allow preservice private or Federal student loan debt to be consolidated or refinanced while retaining the 6 percent rate cap. This tweak to the law would allow servicemembers to participate in both beneficial programs. My bill is supported by the:

Center for Responsible Lending, National Consumer Law Center, National Guard Association of the United States, NGAUS, the Retired Enlisted Association, TREA, Veterans of Foreign Wars VFW, and Woodstock Institute.

We have made substantial progress for students in recent weeks, and more work is ahead as we address the rising student loan debt. This is a small change to the law, but it will have a big impact on servicemembers with large student loan debt. Congress continues to try to address the financial challenges facing our nation's middle class, working families, and students. This fix is one of many steps toward that effort.

I urge my colleagues to consider a simple solution to help servicemembers, and I hope they will support the Servicemember Student Loan Affordability Act.

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