November 25, 2014

Senate leaders reach deal on student loans

A bipartisan group of United States senators comes to a tentative agreement on a plan to keep interest rates on federal student loans from getting out of control. Republican Senator Ron Johnson from Wisconsin wants to solve the problem and get it behind us.

“The Republican compromise with the White House and U.S. Secretary of Education, Arne Duncan would actually cover 100 percent of all new student loans versus the Democratic proposals I’ve seen only covered about 40 percent of the loans. The Republican proposal is just more comprehensive and fixes this problem once and for all. It isn’t just a one or two year temporary fix.”

When Congress failed to reach a deal on extending the low rate July 1, federal student loan rates doubled from 3.4 percent to 6.8 percent. A key contention in the compromise was to keep interest rates low enough for students while reducing the cost to the government.

Johnson says Democrats were making this a political issue. “Which is a shame,” he says. “Of course their solution is just continuing to subsidize at the current rate to the tune of about over $4 billion, asking hard-working Americans to pay those subsidies for other people’s kids going to college, which I don’t think would be particularly fair.”

Under the compromise proposal, interest rates would be tied to market rates. That means when the economy improves, student loan interest rates would rise; however, under the new deal rates are capped to prevent them from going too high. All undergraduates would pay a certain rate — starting at 3.86 percent and capped at 8.25 percent. Graduate students would pay higher rates — starting at 5.41 percent and capped at 9.5 percent. Parents would pay 6.4 percent to borrow money.

Johnson says he’ll need to see the final bill; however, he’d be “predisposed” to voting “yes” on the compromise based on a bill introduced earlier this year. Senate Republican leaders say a vote on the plan could come very soon. The White House has reportedly said they like the bill.

The new rates would apply to loans taken out after July 1.