Congress failed to renew the expired rate structure for federal student loans by July 1st, which caused interest rates to rise from 3.4 to 6.8 percent. Since then, the White House, legislators and borrowers have been eager for a solution. The Senate believes they have found the answer with a bipartisan plan voted through on Wednesday that ties interest rates to the financial market, reports Jeremy Peters of the New York Times.
The vote received overwhelming support from Republicans in the 81-18 vote. 17 Democrats voted against the proposal.
Many liberals are outraged, including senators Elizabeth Warren of Massachusetts and Bernard Sanders of Vermont, because they believe the bill has betrayed their party’s promise to ease the financial burdens of education on working-class families.
Noting that the government stood to bring in nearly $200 billion over the next 10 years because of the higher rates, Ms. Warren denounced the bill.
“This is obscene,” she said. “Students should not be used to generate profits for the government.”
However, the Obama administration says the new rates will retroactively help people who had borrowed since July 1, and estimated it would help 11 million borrowers this year. Education Secretary Arne Duncan released a statement in support of the new bill:
“The President and I have always believed that the path to the middle-class runs through the classroom and that higher education should not be reserved only for those who can afford it. The Senate’s compromise reflects those values and will help low- and moderate-income students better afford college.
“Keeping student interest rates low is just part of our country’s commitment to placing a good education within reach for all who are willing to work for it. There is much more work to do to bring down the cost of college, and all of us share responsibility for ensuring that college is affordable for students and families around the country. We look forward to continuing to work with Congress to figure out how we can significantly bring down the overall debt that students and families have to incur to go to college…”
In a compromise to please Democrats who held concerns that using rates that fluctuated with the markets — meaning it’s possible that they could rise to uncomfortably high levels — Congress set a cap on all students loans: 8.25 percent for undergraduates, 9.5 for graduate students and 10.5 for PLUS recipients.
Students and parents who utilize loans under the PLUS program will receive a fixed rate tied to the 10-year Treasury note.
In contrast to the mixed reaction from Democratic senators, Republicans were thrilled with the plan. House Speaker John Boehner issued the following statement after the bill passed:
“I’m pleased that Senate Democrats finally joined Republicans to pass a bill to provide a permanent, market-based solution on student loans. This bipartisan agreement is a victory for students, for parents, and for our economy, and it is consistent with the House Republican bill passed in May. I’d like to thank Chairman Kline and, especially, Representative Virginia Foxx for their work on this issue, as well as the bipartisan Members of the Senate that completed worked on this measure. The House will act expeditiously.”
Boehner’s office released a chart comparing the House bill and the Senate bill, stating that the legislation is a permanent fix and will protect taxpayers by preventing an increase to the deficit.