New Student Loan Bill Has Endless Summer
By John Sandman
NEW YORK (MainStreet)--A group of U.S. Senators has lined up behind yet another student loan bill, and this time, they say it's the real a deal.
What they agreed to is a compromise where undergraduates with Stafford loans--subsidized and unsubsidized--would pay an interest rate of 3.85% next year--slightly higher than the 3.4% rate that expired on July 1 but less than the 6.8% rate that replaced it.
The gang of nine behind this plan now includes Senators Dick Durbin (D-Ill.), Tom Harkin (D.-Iowa), Jack Reed (D-R.I.) Elizabeth Warren (D-Mass.), Lamar Alexander (R-Tenn.), Joe Manchin (D-W.V.) Richard Burr (R.-N.C.), Tom Coburn (R.-Okla) and Angus King (I-Maine). Not all of them are wild about what they've signed up for. And it is a temporary, one-year fix--one that the House has yet to agree to.
What's more, the plan is linked to market rates--the 10-year Treasury bill--and rates are going up. There is a cap on how high they can go.
Undergraduate rates will stop at 8.25%. PLUS loans for graduate students would be limited to 9.5%, and loans co-signed by parents would peak at 10.5%.
"People signing up for their student loans will pay about half what they would have paid" without this bill, said Maine Independent Angus King.
But even with the caps, Stafford loans could go as high as 8.25% in future years--reflecting a major concession from some senate Democrats, including Warren and Harkin.
Chris Lindstrom, higher education director at U.S. PIRG said she was sure that a deal would get done this week with a vote in the Senate as early as next week. "Things will move very quickly from there in terms of conferencing and a White House signing," she said. "Even if it weren't done until September, then the deal would be retroactive."
But Lindstrom thinks it's a bad deal. Even if rates are kept 3.85--or less--for next year for subsidized Stafford borrowers, "that benefit is paid for by all borrowers who will see rates higher than current policy as soon as 2015. Worse, the deal makes permanent $184 billion of needless profit to be extracted from all borrowers over ten years for purposes of balancing the budget."