House Approves Compromise on Student Loan Rates
he House passed a measure Wednesday that resolves a dispute over how to set student loan rates, sending it to President Obama, who has said he would sign the legislation “right away.”
The compromise proposal, which passed 392 to 31, bases rates on the market and, at least temporarily, will allow some recipients of new federal student loans to pay lower rates than last year.
As the economy improves, however, rates will increase. But the bill also caps the rates and allows borrowers to lock in interest rates over the life of the loan.
“We wanted to get this out of the partisan, political squabble,” said Rep. John Kline (R-Minn.), chairman of the Committee on Education and the Workforce. “We wanted to let the market do this is in a way that’s fair to students and the taxpayer.”
Undergraduates who take out Stafford loans will probably pay 3.9%, calculated by adding 2.05 percentage points to the rate for the 10-year Treasury note. The loan rate is capped at 8.25%. Borrowers of PLUS loans will pay 4.6 percentage points above the 10-year Treasury rate, or 6.4% this fall.