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At a time when compromise appeared impossible in a gridlocked Congress, a bipartisan deal on the student loan program somehow emerged from Capitol Hill and is set for signing Friday by President Barack Obama.
The compromise, which will save college students who borrow money for get an education thousands of dollars in interest charges, on Obama desks a signing deal.
The legislation emerged from an often gridlocked Congress just before the August recess and will result in lower interest rates for some 11 million students just before they start in Congress this fall.
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 the previous 3.4 percent rate. Without congressional and presidential action, rates would have stayed at 6.8 percent — a reality most lawmakers called unacceptable.
The compromise that came together is 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 for 10-year Treasury notes.
Undergraduates this fall would borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. 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.
Interest rates would not top 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.
Even as they passed the bill, officials were already talking about a broader approach to curbing fast-climbing costs and perhaps scrap the deal when they take up a rewrite of the Higher Education Act this fall. As a condition of his support, Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, won a Government Accountability Office report on the costs of colleges. That document was expected to come in December.
“Even with this important bill signed into law, much work remains to ensure college stays within reach for middle-class families and those striving to get into the middle class,” White House spokesman Jay Carney said Thursday
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