Rounds Introduces Legislation to Offer Affordable Student Loan Option

WASHINGTON – U.S. Senator Mike Rounds (R-S.D.) introduced legislation to offer a new affordable student loan option that would leverage private financial institutions to cover the cost of college. By guaranteeing loans made through eligible lenders and making sure no interest accrues while students are in school, the Affordable Future Loan Program Act provides students a sustainable and affordable solution.

The Affordable Future Loan Program would exist alongside the current system and would provide another option for financing or for students who need to fill the gap between federal aid and the cost to attend most public institutions. The program is inspired by the Federal Family Education Loan Program (FFEL) that was created by the Higher Education Act of 1965 but repealed in 2010. Since 2010, all federal loans have been issued by the Department of Education (ED).

“Students in South Dakota and across the nation need a more affordable way to take out loans and pay for higher education,” said Rounds. “The Affordable Future Loan Program would allow students to use private financial institutions to take out federal loans. By utilizing the efficiencies of the private sector and providing enough financing to cover the actual cost of going to school, this program will ultimately save money for hardworking students and their families. While it doesn’t change any existing programs, this bill would provide a low-interest choice for financing education and take Washington bureaucrats out of the process.”

“With guaranteed loans that do not accrue interest while students are in school, the act provides a lifeline to students who struggle to bridge the gap between federal aid and the rising costs of higher education. Senator Rounds’ innovative approach will make higher education attainable for all Americans, preserving the dream of college for future generations,” said Jeff Olson, President-CEO, Dakota Credit Union Association. “The Affordable Future Loan Program Act, championed by Senator Mike Rounds, offers a crucial solution to the pressing issue of college affordability. By leveraging the private sector to create a sustainable and affordable loan product, this legislation ensures that middle-class families across the country are no longer burdened with long-term debt.”

“Choosing a college or trade school is a decision most students look forward to making, but with rising costs and a decrease in available financing, these decisions have become an impossible burden for middle class families,” said Jim Nussle, President/CEO of America’s Credit Unions. “Senator Rounds’ Affordable Future Loan Program Act – legislation that America’s Credit Unions fully supports – brings new life to these important, life-altering decisions. Whether you are choosing to pursue an undergraduate degree or seeking a trade education, this bill helps close the gap in affordable loan options, sets students up for success, and better ensures their financial well-being.”

“I appreciate Senator Rounds trying to pull together local, state, and federal stakeholders in education,” said South Dakota Senator Steve Kolbeck. “It’s clear he wants to keep what is working, fix what is broken, and bring back what has worked in the past. I’m optimistic he can help us push local control and education financing to be more community focused while still maintaining accountability of tax dollars. Over regulation is as harmful to education as under regulation is and finding commonsense solutions should be achievable.” 

“I commend Senator Rounds for addressing the issue of student loan reform and looking for ways to include the private sector in this solution,” said Dylan Clarkson, President & CEO of Pioneer Bank & Trust and Chairman of the South Dakota Bankers Association. “Offering a more affordable student loan option is not only good for students, but also good for local banks and the economy.”

The Affordable Future Loan Program Act would issue federal student loans through private financial institutions. Loans would be guaranteed 98% by the federal government when the student attends an accredited institution. Students are able to borrow equal to the average cost to attend a public university plus room and board. Students would not accrue interest while they are in school, and the interest rate would be set by the Treasury 10-year note instead of Congress as it is currently.

Under Rounds’ plan, the maximum interest rate that may apply is capped at 6.28%, while right now the interest rates for ED range from 6.53%-9.08%.

Click HERE for full bill text. Click HERE to read a one page summary of the bill.

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