U.S. House votes to avert jump in student loan interest rate
By a vote of 221-198, the House passed legislation that would reset interest rates on federal student loans and avert a scheduled doubling of rates this summer.
The bill, HR 1911, would peg new student loan interest rates to yields on the 10-year Treasury note, meaning that the rates would fluctuate. It would also set maximum caps on those variable rates.
The proposal faces opposition in the Democratic-controlled Senate, where Majority Leader Harry Reid of Nevada has endorsed a plan that would extend, for two years, the fixed rate of 3.4 percent for subsidized Stafford loans, which are available to low-income students.
Without congressional action, the interest rate on those loans will double to 6.8 percent July 1 – an action that would affect more than 7 million students.
Under current law, Congress sets the rates for student loans. Legislation enacted in 2007 set the interest rate on new subsidized Stafford loans at 3.4 percent. That rate was to expire last year, in the midst of the presidential campaign, and Congress extended it through June 30.
A report by the Republican staff of the House Education and the Workforce Committee said the bill passed yesterday would stop “politicians from the business of setting student loan interest rates.”
In addition to subsidized Stafford loans, on which interest doesn’t accrue until after a student graduates, the measure would affect rates for unsubsidized Stafford loans, which are available regardless of financial need, and Plus loans, which are available to graduate students and parents of undergraduates. The current rate for unsubsidized Stafford loans is 6.8 percent; for Plus loans, the rate is 7.9 percent.
The bill would set interest rates on both types of Stafford loans at the 10-year Treasury yield – currently about 2 percent – plus 2.5 percent.
The White House opposes the House measure and
has threatened a veto, in
part because the bill would allow interest rates to fluctuate over a loan’s repayment period.