Politics
House okays student loans bill, awaits Obama assent
A bipartisan bill that would lower the costs of borrowing for millions of students is awaiting President Barack Obama’s signature.
The House on Wednesday gave final congressional approval to legislation that links student loan interest rates to the financial markets. The bill would offer lower rates for most students now but higher rates down the line if the economy improves as expected.
For the moment, the focus was on the class of students signing loans for classes this fall.
The measure passed 392-31.
Undergraduates this fall would borrow at a 3.9 percent interest rate for subsidized and unsubsidized Stafford loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last. Rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.
But for now, interest payments for tuition, housing and books would be less expensive under the House-passed bill.
The House earlier this year passed legislation that is similar to what the Senate later passed. Both versions link interest rates to 10-year Treasury notes and remove Congress’ annual role in determining rates.
Negotiators of the Senate compromise were mindful of the House-passed version, as well as the White House preference to shift responsibility for interest rates to the financial markets. The resulting bipartisan bill passed the Senate 81-18.
With changes made in the Senate, most notably a cap on how interest rates could climb and locking in interest rates for the life of each year’s loan, Democrats dropped their objections and joined Republicans in backing the bill.
Interest rates would not top 8.25 percent for undergraduates. Graduate students would not pay rates higher than 9.5 percent, and parents’ rates would top out at 10.5 percent.
Rates on new subsidized Stafford loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at 3.4 percent. Without congressional action, rates would have stayed at 6.8 percent, a reality most lawmakers called unacceptable.
The compromise that came together during the last month would be a good deal for all students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct.
The Obama White House and its allies said the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate US$1,500 in interest charges.
In all, some 18 million loans will be covered by the legislation, totaling about US$106 billion this fall.
Copyright 2013 The Associated Press