Congress Reaches Deal on Student Loans
Students who use subsidized Stafford loans to help pay for college might not be completely screwed after all.
A group of U.S. Senators has reached a deal with the White House to bring down the loan interest rates that doubled from 3.4 percent to 6.8 percent on July 1 after months of holdout.
“While this isn’t the agreement any of us would have written — and many of us would like to see something quite different — I believe we have come a long way in reaching common ground on a very, very difficult and challenging topic,” Majority Whip Dick Durbin told the AP.
The compromise gives Republicans what they wanted in tying subsidized loan rates to 10-year treasury bills, but also included a percentage cap which Democrats have been vying for since the beginning. Under these terms, loan rates will be 3.86 percent this fall instead of the 6.8 percent that took hold after Congress failed to act.
The new cap is expected to be 8.25 percent for undergraduates, although the Congressional Budget Office does not expect loan rates to approach that number for more than a decade.
“That comes directly off the backs of our students,” Mass. Senator Elizabeth Warren told the AP. “We need to take steps now to lower the profit we make off the backs of our kids.”
The only major discrepancy between the Senate and House bills is whether the loan rates will be fixed. The Senate bill locks in the rate at the time of borrow while the House bill allows the interest rate to fluctuate for the life of the loan. Senate leadership says it is confident that detail will be worked out.
“Doing nothing will mean students and their families will pay 6.8 percent for their loans for the foreseeable future,” Durbin said. “Walking away from this bipartisan approach is going to mean more debt for students, higher interest rates. I don’t think that’s fair.”
A vote is expected next week. Here’s more from the AP.