U.S. Rep. Blaine Luetkemeyer (MO-3) today voted in support of the Smarter Solutions for Students Act which would stop student loan interest rates from statutorily rising from 3.4 percent to 6.8 percent and get Congress out of setting student loan interest rates by basing them on the free market.

“With the current state of the economy, today’s students and post-graduates need certainty that their student loan interest rates will not continue to be based on arbitrary numbers set by  Washington politicians,” Luetkemeyer said. “This legislation will get Congress out of setting student loan interest rates and base them on the free market which will strengthen federal student loan programs and serve the best interests of both borrowers and taxpayers.”

The Smarter Solutions for Students Act would calculate subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury Note plus 2.5 percent. It would also calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury Note plus 4.5 percent. Student loan interest rates would reset once a year, allowing rates to move with the free market and ensure borrowers to take advantage of lower interest rates when available. Student loan interest rates are slated to increase from 3.4 percent to 6.8 percent on July 1.

Based on the current Treasury note, this legislation could lead interest rates to drop by as much as two percent for millions of Stafford and PLUS loan borrowers this summer. Additionally, this legislation maintains students’ ability to consolidate their loans after graduation and lock in a fixed rate for the life of the loan.