Breakthrough Reached on Student Loan Interest Rate Rise
July 19th, 2013 by Jonathan Frankel
Attention US students: Key negotiators in the Senate announced late Wednesday night that they had reached a tentative deal to resolve the recent jump in student loan interest rates.
Though the legislation exists on paper only at the moment, because the agreement came from a round of talks between key Senators from both sides of the aisle, signs are good that a compromise plan will soon resolve the stalemate that led to a doubling of student loan interest rates on July 1st. This effect can mean relief for a US students whether they stay home this academic year – or whether they choose to go abroad.
Even though details are still emerging, a White House spokesman said that students and the families can rest assured that the compromise reached Wednesday will result in lower borrowing rates this fall. Moreover, the proposal would also limit how high those rates could go over time – a key sticking point that had stalled earlier negotiations.
Though both Democrat and Republican legislators had sought to avert the rise, disagreement among them on a solution to the problem led to their inaction and as a result students who took advantage subsidized government loan programs (including the popular Stafford loan) saw the interest rates on those loans rise from 3.4% to 6.8%.
While few students have yet been impacted because students typically do not take out loans until just before they return to campus – and the rise affects only newly issued loans – the looming increase was expected to cost borrowers and their families billions of dollars over the life the newly issued loans.
In any case, even though legislation may not be passed by both House of Congresses for a few weeks, negotiators reassured constituents that the proposal would apply retroactively to students who have already drawn federal loans at higher rates which went into effect on July 1. Thus, even though some 11 million families nationwide are doubtless holding their breath because nothing is set in stone yet they are also, doubtless, breathing a little easier.