Brittany Wools isn’t sure how big of a loan she’ll need to finance her college education, but she’s glad Congress acted in time to keep the interest rates on whatever she ends up needing down the road.
“It could be a lot of money,” said Wools, 18, of Detroit, an incoming freshman at Wayne State University, while walking on campus earlier this week. “Anything that saves me money is good.”
Congress had to act by Sunday to keep the interest rates on any new federally subsidized Stafford loans granted after July 1 from doubling from 3.4% to 6.8%. Projections were that the average student would have had to pay an extra $1,000 a year in interest. Stafford loans are available to students who demonstrate financial need.
The action by Congress caps the interest rate for only one more year.
The student loan provision was combined with a transportation spending bill. Congressional leaders rolled the highway and student loans into a single bill because both are financed in part with pension law changes.
Had the measure failed, interest rates would have mushroomed to 6.8% for 7.4 million students expected to get the loans over the coming year, antagonizing students — and their parents — four months from Election Day.
The measure cleared the House on a 373-52 vote. The Senate passed it 74-19. President Barack Obama is expected to sign it.
The unusual display of harmony in a bitterly partisan year signaled lawmakers’ eagerness to claim credit for providing transportation jobs, to avert higher costs for students and their families and to avoid being
embarrassed had the effort run aground.
This year has seen the two parties mostly drive each other’s plans for tax breaks and economic revival into a stalemate, although lawmakers have enacted bills retaining the Social Security payroll tax cut for a year and renewing a government agency that promotes U.S. exports.
All the no votes were cast by Republicans.
The conservative Heritage Action for America and the anti-tax Club for Growth urged a no vote on the bill in
e-mails Thursday to lawmakers, warning that it will be counted as a key vote on their legislative scorecards.
“This massive bill spends too much money, will continue taxpayer bailouts for highway spending and keeps subsidies that have contributed directly to skyrocketing tuition rates,” Club for Growth spokesman Barney Keller said.
“While there is still a lot of work left to do to make college more affordable, this deal is a step in the right direction,” said U.S. Rep. Gary Peters, a Bloomfield Hills Democrat, one of co-sponsors of the Courtney-Peters bill that capped the interest rate.
University of Michigan doctoral student Joanna Frye, who is studying higher education finance and policy, said she thinks a broader discussion needs to be had.
“(We) need a more comprehensive discussion on purpose of federal financial aid and most effective use of dollars,” she said.
U.S. Rep. Hansen Clarke, a Detroit Democrat, was among those who thought there needs to be a bigger look at the issue.
“I support the one-year extension to the 3.4% interest rate for federal student loans, but this Band-Aid does not solve the problem. Congress must reduce the current $1-trillion student loan debt burden on our families. The student loan system in this country is broken,” he said.
About $1 billion of the $6-billion cost of the low-interest rate extension comes from a GOP plan to limit federal subsidies for Stafford loans for undergraduates to six years. Currently, the government charges no interest while students are still in school, even if it takes them longer than six years to graduate.
U.S. Secretary of Education Arne Duncan praised the move to keep interest rates from jumping.
“I want to thank the nation’s young people for making their voices heard on an important economic issue directly affecting them,” he said in a statement. “You spoke, the nation heard you, and Congress acted. Democracy worked because of your tireless efforts.
“Both the president and I believe education is a public good. College should not be reserved only for those who can afford it. All of us share responsibility for making college affordable and keeping the middle-class