The U.S. House of Representatives overwhelmingly approved a Senate compromise today that shrinks student loan rates. Members of Utah’s congressional delegation say it was a good bipartisan deal.
Earlier this month, rates on federally subsidized student loans doubled from 3.4 percent to 6.8 percent after Congress failed to reach a deal before a July 1st deadline. In a retroactive move, the U.S. Senate agreed on a bill last week that would bring those rates back down.
Utah Republican Congressman Chris Stewart says it’s not much different than a bill the GOP-led house passed in May`. Both tie interest rates to the financial markets.
“I think it’s a great example of where finally the house and the Senate found some things that they can work on together that they could agree on," Stewart says. "Now the House version I think had more government savings and that was something that I thought was important. But it’s also important to make college as affordable as we can for kids”
Under this new deal, undergraduate students will pay 3.9 percent interest on their subsidized and unsubsidized loans. In addition, graduate students will pay 5.4 percent and parents will pay 6.4 percent. These rates are expected to climb as the economy improves.
But the current bill puts a cap on how high interest rates could climb. Loans for undergraduates would be capped at 8.25 percent. It also freezes rates for the life of the individual loan.
Democratic Congressman Jim Matheson says he would have preferred fixed rates, instead of tying them to the market, which some fear will lead to increases in the near future.
“I have that concern but I recognize that Congress can always take another bite at the apple," Matheson says. "If rates move in a way that makes it where people are uncomfortable with how this legislation calculates the rate for student loans then Congress does have the opportunity to vote on this again and can modify it in a different way.”
President Obama is expected to sign the bill into law.