Senate Reaches Compromise on Student Loans
The Senate has reached a new compromise on interest rates for new federal student loans that resembles versions championed by the House and President Obama. Under the Senate plan, federal loans would be pegged to the 10-year Treasury bill. Students receiving undergraduate Stafford loans would pay an additional 2.05% (with a cap set to 8.25%; graduate loans would add 3.6% to the T-bill (with a cap of 9.5%); and PLUS loans would come with a 4.6% surcharge (with a cap of 10.5%).(July 18, viaUSA Today)
The Congressional Budget Office found that the compromise legislation pieced together last night by a group of senators will cost $22 billion over ten years, a blow to the bill’s backers who hoped the proposed plan to overhaul the nation’s federal student loans wouldn’t add to the budget.Associated Press with the deets. (July 11)
Original (July 11)
If at first you don’t succeed, try and try again. A group of senators took the adage to heart, agreeing to an overhaul of the federal student loan program last night after several false starts and voted-down bills during the past month.
The compromise resembles proposals put forth by the White House and leading Republicans: Loans will be pegged to the interest rate of the 10-year Treasury yield, with undergraduates paying an additional 1.8 percent per loan while graduate students pay 3.8 percent. Regardless of what the Treasury yield will be in the future, the plan would cap rates on undergraduate loans at 8.25 percent and 9.25 percent for graduate loans (current rates are lower than what the maximum rates can be under the new measure).
The Senate bill would apply retroactively to loans affected by the July 1 rate hike, which occurred after lawmakers could not agree on a solution to prevent subsidized Stafford loans from doubling to 6.8 percent. The compromise legislation would be more expansive, also encompassing unsubsidized Stafford loans and PLUS loans that carry higher rates.
Despite several setbacks, including a failed vote on a bill to extend rates another year to 3.4 percent yesterday afternoon, Sen. Majority Leader Harry Reid (D-NV) remained hopeful, citing ongoing conversations and a desire among lawmakers to come to an agreement. It appears his hunch was correct.
While the full chamber has yet to vote on the measure, The Huffington Post writes the bill is likely to pass after gaining support from two leading liberal Democrats, Sen. Dick Durbin (D-Ill.) and Sen. Tom Harkin (D-Iowa).
The story is still ongoing, but here are what other outlets are writing:
The Huffington Post: “A bipartisan group of senators struck a deal late Wednesday to overhaul the federal student loan program,&tying interest rates on new loans to the U.S. government’s cost to borrow in a move that immediately reduces the cost to finance higher education, but is forecast to raise borrowing costs for millions of graduate students and parents in about three years.”
Inside Higher Ed: “Final details on the interest rate are awaiting a score from the Congressional Budget Office, expected midday today. But late Wednesday night, the group agreed that all undergraduate loans would be set at the 10-year Treasury yield plus 1.8 percentage points. For graduate loans, the rate would be the 10-year yield plus 3.8 percent; for Parent PLUS loans, the 10-year yield plus 4.5 percent.
“Setting a single rate for all undergraduate loans means that subsidized loans, which go to students determined to have financial need, would no longer have lower rates than unsubsidized loans, which are available to all undergraduates regardless of need.”
Bloomberg:“The talks were led by Senator Dick Durbin of Illinois, the chamber’s No. 2 Democrat, and Tennessee Senator Lamar Alexander, the top Republican on the Senate health and education committee. Lawmakers are awaiting a cost analysis from the Congressional Budget Office before signing off on the accord, the aides said. The CBO analysis would determine whether the proposal doesn’t add to the budget deficit.”
The New York Times: “But even with that cap, the deal represents a clear retreat for Democrats, most of whom did not want student loan rates tied to market rates. The Senate on Wednesday tried to reimpose a 3.4 percent, fixed and subsidized rate on Stafford loans, a rate that lapsed and doubled on July 1. But the bill fell to a filibuster.”
The Atlantic (Opinion): “So that’s the technical stuff. But how should we allfeelabout it? Well, if you’ve been angry about the profitsthe government currently earns off student loans, then by all means, continue grumbling. According toThe New York Times,Democrats say they don’t want the legislation to add or subtract form the deficit. In other words, the Department of Education will keep making the same exact returns on its lending as today.”
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