On Wednesday, the Senate overwhelmingly agreed to change the interest rates on student loans, opting to introduce a variable rate instead of a fixed one.
Bill S-1241, which passed by a margin of 81-18, is seen as a compromise by its supporters. The bill, dubbed the “Bipartisan Student Loan Certainty Act of 2013,” also rescinds the July 1st doubling of student loan rates.
“If we don’t pass this today, there will be one sure effect: student loans will be almost twice what they would be under this bill,” Senator Tom Harkin (D-Iowa), said on the Senate floor before the vote. “This is a true compromise.”
If the bill is approved into law, new undergraduate loans will receive an interest rate of 3.9 percent. Interest rates for both unsubsidized and subsidized Stafford loans will fluctuate based on the 10-year Treasury note, plus an increase of 2.05 percent for undergraduates and 3.6 percent for graduate students. Additionally, interest rates will be capped at 8.25 percent for undergraduates, and 9.5 percent for graduates.
While the majority of the Senate viewed the bill as a great step forward for college affordability, opponents say the bill simply offsets increases in student loan interests to a later date and does not address the over $1 trillion that are currently tied up in past loans.
“My colleagues who support this proposal say that it will lower interest rates on loans for this year — and that’s all that matters,” Senator Elizabeth Warren (D-Massachusetts). “Now, that’s the same thing credit card companies said when they sold zero-interest credit cards, and it’s the same thing subprime mortgage lenders said when they sold teaser-rate mortgages. In all of these cases, the bill comes due.”
President Barrack Obama told a gathering at Knox College on Wednesday that he supports the bill, adding that he plans to continue disrupting the higher education industry to initiate more changes.
“This week, we’re working with both parties to reverse the doubling of student-loan rates that occurred a few weeks ago because of Congressional inaction,” he said. “It’s all a good start—but it isn’t enough.”
