Is it breezy in here or is the combined sighs of relief we’re feeling from college students and parents now that the Congress has reached a compromise on student loan rates? After weeks of the Senate trying to wangle a way to retroactively keep those rates down, the House voted yesterday to approve a compromise from the Senate, which will tie interest rates to the dips and dives of the financial markets.
The current fixed rates for Stafford loans and PLUS loans are 6.8% and 7.9%, respectively, but in the coming school year undergraduates will get a rate of 3.86% while graduate students will be set at 6.41%, reports the Washington Post. The rate a student gets initially will be locked in for the life of the loan.
This will be a retroactive rate for anyone who took out loans since July 1, which was when the rate had doubled from 3.4% to 6.8%. At that time, the Senate went off on vacation to grill hot dogs and wear ill-advised leather sandals with socks, but had promised to come back and figure things out afterward.
There’s an 8.25% cap for undergraduates and a 9.5% limit for graduate students, with a 10.5% cap for PLUS loans. If the economy gets healthier, future loan seekers will likely see higher rates, but Democrats have indicated they’ll work on a new plan to address that issue before it happens.
The issue of student loan rates has been a bone of contention between the House and the Senate, with a bit of mudslinging going back and forth. The House approved a plan in May that links interest rates to the market, which means rates could change over the lifetime of the loan. The Senate didn’t approve their plan until last week, after the efforts of a bipartisan group of politicians finally hammered out the details.
All the plan needs now is a signature from President Obama, who is expected to sign off on the measure. It remains to be seen if this will be a forever and ever solution, or a plan that will need updating and tweaking as it goes on.
Congress approves student loan plan [Washington Post]