By Abby Smith
The Senate overwhelmingly Wednesday approved a compromise measure that will lower interest costs on student loans in the near future even as critics fear the bill does not permanently guarantee interest rates won’t dramatically rise toward the middle of the decade.
By a vote of 81-18, the Senate sent the bill to the Republican-controlled House where it is expected to easily win approval next week. In a break for students, the compromise cancels a doubling of the interest rate on subsidized Stafford student loans that went into effect on July 1. The new interest rate will now be 3.86 percent.
President Barack Obama hailed the bill’s passage, which he said in a statement would save “undergraduates an average of more than $1,500 on loans they take out this year.”
Obama added that he hopes “both parties build on this progress by taking even more steps to bring down soaring costs and keep a good education – a cornerstone of what it means to be middle class – within reach for working families.”
House Speaker John Boehner, R-West Chester Twp., called the compromise “a permanent, market-based solution on student loans. This bipartisan agreement is a victory for students, for parents and for our economy.”
Sen. Rob Portman, R-Ohio, voted in favor of the bill, and Sen. Sherrod Brown, D-Ohio, opposed the measure.
The compromise, sponsored by Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin, D-Iowa, would link student loan interest rates to the market’s 10-year Treasury note.
Once a student takes out a loan, the interest rate would be fixed for the life of the loan and capped at 8.25 percent for undergraduate students and 9.5 percent for graduate students.
According to a White House press release, “a typical undergraduate borrower in Ohio who borrows $6,747 will save about $1,507 over the life of those loans’’ under the Senate compromise.
But critics, such as Brown, warned that while the compromise might benefit students this year, it would lead to a sharp increase in interest rates in the future. Projections show that undergraduate interest rates could surpass the 8.25 percent cap as early as 2017.
The House’s version, approved in May, would have allowed rates to fluctuate with the market, which critics claimed would have created uncertainty for students taking out loans.