U.S Senate lawmakers are getting close to a deal on keeping student-loan rates stable for another year, according to a Senate aide. The agreement between Senate Republicans and Senate Democrats could be announced as early as Monday or Tuesday of next week. There’s no deal yet with House lawmakers, however, which is obviously a key stumbling block to getting the deal done before a June 30 deadline.
Some background: Rates on new federally subsidized Stafford loans are slated to jump to 6.8 percent from 3.4 percent on July 1 unless Congress acts to stop it. That is roughly $1,000 over the life of a 10-year loan, or somewhere around $6 to $10 month per student, according to this report from the Congressional Research Service.
Both President Barack Obama and presumptive GOP presidential nominee Mitt Romney agree that the loan rates need to stay stable, as do key members of Congress in both parties. The big holdup has been how to cover the $6 billion pricetag. Senate lawmakers are still hammering out the final deal, but part of the cost will likely be covered by changes to federal funding for private and public pensions, according to the aide.
Of course, all of this will also have to be worked out with the House. And once Congress finally passes something, there will still need to be a long-term solution on student-loans. And part of that debate could well revolve around whether interest rates on student-loans should be “fixed” (set by Congress) or “variable” (driven by the market).
U.S. Rep. John Kline, R-Minn., the chairman of the House Education and the Workforce Committee, is on Team Variable.
“If we still had that variable rate, those student loan interest rates would be about two and a half percent. We need a long-term solution. We can’t be in this position of Congress and the White House trying to decide every year what the rate should be,” Kline told me and Congressional Quartley’s Rich Cohen on C-SPAN’s Newsmakers program. Watch the whole thing here.
Some folks aren’t fans of variable rates because they can make things unpredictable for students. Here’s Kline’s response to that: “This is pretty unpredictable for students. What we have now is a political decision.”
Kline said that instead of having lawmakers and the administration pick the rate, “We should let the market do that.”