Associated Press , Published July 24 2013
Hoeven, Heitkamp praise Senate passage of student loan rates billWASHINGTON – Borrowing for tuition, housing and books would be less expensive for college students and their parents this fall, but the costs could soon start climbing under a bill the Senate passed overwhelmingly Wednesday.
The bipartisan proposal would link interest rates on federal student loans to the financial markets, providing lower interest rates right away but higher ones if the economy improves as expected. The measure was similar to one that already had passed the Republican-led House and leaders from both chambers said they predicted the differences to be resolved before students start signing loan documents for fall term.
In a statement, Sen. John Hoeven, R-N.D., a sponsor of the student-loan bill, called it “a long-term fix that will give virtually all students a lower rate.”
“Just as important, we now have a bill that I believe the House will pass and the president will sign by August, giving students the certainty of knowing they will have access to affordable rates for the coming school year,” he said.
Sen. Heidi Heitkamp, D-N.D., joined him in hailing the bill. “Instead of kicking the can down the road, today we agreed to a long-term solution on student loans,” she said in a statement.
She noted the cap on interest rates as a key provision that she pushed for. “I wanted students to be able to take advantage of the current low interest rates, but I insisted the rate be capped so future students are secure if conditions change.”
Sen. Al Franken, D-Minn., said in a statement that he voted for the bill, in part, because of the cap. But he made clear he wasn’t happy about it. “Now, this was a compromise, and like all compromises, there were some things in this bill that I didn’t like.”
He said he co-sponsored two bills that would have extended low interest rates so Congress could have more time to negotiate, but the Senate couldn’t vote on them because of a Republican filibuster threat.
As passed 81-18 by the Senate, the bipartisan compromise would allow undergraduates to borrow at a 3.9 percent interest rate this fall. 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.
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 stay at 6.8 percent – a reality most lawmakers called unacceptable, although deep differences emerged even among allies as to how to remedy it.
As part of the compromise, Democrats won a protection for students by capping rates at a maximum 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.
Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.
The Congressional Budget Office also estimated the bill as written would reduce the deficit by $715 million over the next decade. During that same time, federal loans would be a $1.4 trillion program.
The compromise that came together during the last few weeks 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 next step, according to Heitkamp and Rep. Kevin Cramer, R-N.D., is addressing another higher education challenge.
“Now we must turn our attention to the increasing cost of higher education and helping students address existing debt,” she said in a statement.
“We need to get beyond the discussion of interest rates to focus on the larger issue of rising tuition and student debt,” Cramer said in a statement.
Forum News Service contributed to this report
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