Student Loan Compromise Approved
By Adrienne Lu, Staff Writer
Students heading to college this year will see lower interest rates on federal student loans, after Congress approved a bipartisan compromise to change the way the federal government sets interest rates on student loans.
The U.S. House approved the measure Wednesday by a vote of 392-31. The Senate passed the legislation by a vote of 81-18 on July 24.
Interest rates on subsidized Stafford loans doubled on July 1 from 3.4 percent to 6.8 percent when Congress failed to intervene.
The compromise legislation ties interest rates to the rate on high-yield 10-year Treasury notes, with caps of 8.25 percent for undergraduates and 9.5 percent for graduate students. Parents’ interest rates would not exceed 10.5 percent.
Student advocates warned that while the compromise would help students in the short run, it would make borrowing more expensive in the future.
“Over the next 10 years it is expected to cost borrowers $715 million more than if current rates were simply left in place, and current rates are already projected to generate $184 billion in profit,” said Lauren Asher, president of The Institute for College Access and Success, a nonprofit based in Oakland, Calif., which aims to make higher education more available and affordable.
Nationwide, more than 38 million people owe about $1 trillion in student loans.