College loan rate hike averted
Congress approved the student loan extension bill on Friday, just two days before the Stafford loan interest rate was scheduled to double.
H.R. 4348, passed with a 373-52 vote in House and 74-19 vote in the Senate, would allow the college loan interest rate to remain at 3.4% for another year. The bill was promptly signed into law by President Barack Obama.
“I applaud leaders in Congress for answering the President’s call to action and striking a deal that will help make college more affordable for millions of students,” said Secretary of Education Arne Duncan. “Education is a public good. College should not be reserved only for those who can afford it. All of us share responsibility for making college affordable and keeping the middle-class dream alive.”
Had Congress not taken action, interest rates for the subsidized Stafford loans would have jumped to 6.8% on July 1. The rate hike would have affected nearly 7.5 million students and increased each borrower’s debt by an average of $1,000.
“Students already face unprecedented student loan debt and adding an additional $1,000 more would not only crunch individual borrowers, but would have further weighed down the recovering economy,” said Rich Williams, Student PIRGs Higher Education Advocate.
Since March, tens of thousands of students from around the country joined the “Don’t Double My Rate” campaign to pressure Congress to extend the current student loan rate.
The last-minute deal was reached earlier this week following months of partisan gridlock over how to pay for the $6 billion it would cost to extend the 3.4% interest rate through July 1, 2013.
Democrats sought to pay for the cost by closing tax loopholes on businesses whereas Republicans wanted to offset the cost by cutting health care programs that serve the elderly.
Both sides reached a compromise this week to offset the cost by limiting the federal student loan subsidies for undergraduates to 6 years. The limit for student pursuing associate degrees is set at 3 years.
Currently, students who take longer to complete their degrees are not charged interests on their loans as long as they remain enrolled in school. However, that will change for student borrowers beginning on July 1, 2013; interest rates will begin accruing after the 3-year or 6-year periods for associate and undergraduate degrees respectively.
The cost of the rate extension will also be offset by changes to corporate pension rules that would limit the tax deductions companies can claim year to year.
- House.gov: Conference Report for H.R. 4348 (PDF)
- House.gov: H.R. 4348 text of bill (PDF)
- Senate.gov: Roll call vote #172 on H.R. 4348
- Clerk.House.gov: Roll call vote #451 on H.R. 4348
- Thomas.LOC.gov: Bill Summary & Status 112th Congress (2011 – 2012) H.R.4348
- Rules.House.gov: H.R. 4348 conference report & hearing on June 28, 2012
- WhiteHouse.gov: Statement by the Press Secretary on H.R. 6064
- WhiteHouse.gov: Don’t double my rates
- CBO.gov: Estimated Budgetary Impact of Bills to Prevent the Scheduled Increase in Interest Rates on New Federal Student Loans
- Reid.Senate.gov: Reid Statement On Student Loans And Transportation Bill Compromise
- U.S. Department of Education: Statement from U.S. Secretary of Education Arne Duncan on Action to Prevent Student Loan Interest Rates From Doubling
- WhatTheFolly.com: Republicans filibuster Senate vote on student loan rates
- WhatTheFolly.com: Senate remains gridlocked over student loan rates
- WhatTheFolly.com: Student loan delinquency rate climbs above 20%