Congress acted just under the wire Friday to save college students from paying more for student loans. The legislation will freeze interest rates on federally subsidized Stafford loans at 3.4 percent, avoiding a scheduled increase on July 1 to 6.8 percent.
Hours after Congress passed the measure, President Obama signed it into law—temporarily—effective through July 6. He is expected to make it permanent before the stopgap measure expires at the end of next week.
The measure was part of a bill to fund construction and federal flood insurance. On Tuesday, U.S. Senate leaders announced they had agreed on a plan to come up with $6 billion to cover the cost of the lower student loan interest rates. The bill passed on a 74-19 vote in the Senate and a 373-52 vote in the U.S. House of Representatives.
Most of the money is expected to come from raising premiums for federal pension insurance. But students also will help foot the bill. Congress is looking to get $1.2 billion in savings from changing eligibility for student loans. It limits loan eligibility to 150 percent of a program’s time to degree — or six years for a bachelor’s degree and three years for an associate degree.
The move to stop interest rates from doubling is expected to affect 7.4 million students, saving each an average of $1,000 in extra financing fees.
Student groups have been actively lobbying Congress to keep interest rates down. On June 28, students and graduates carried banners to Capitol Hill and delivered a petition with 1 million signatures calling for action to freeze interest rates.
The wave of student mobilization changed the political calculus to get this legislation passed, says Rich Williams, higher education advocate for U.S. Public Interest Research Group in Washington, D.C.
“When Congress considers further action to decrease student loan debt, they’ll know that students are paying close attention,” says Williams. “Congress listened to students and their families and delivered a bill that stops student loan interest rates from doubling. Students already face unprecedented student loan debt and adding an additional $1,000 more would not only crunch individual borrowers, but would have further weighed down the recovering economy. We applaud Congress for coming together to pass this much-needed legislation.”
The Education Trust issued a statement that said Congress did the right thing by protecting low interest rates on college loans. “While it took them too long to reach a bipartisan agreement, federal lawmakers finally put aside political theatrics in order to strengthen the U.S. economy, which needs millions more college-educated workers than we’re currently producing,” the statement said.
But as critical as this protection is, The Education Trust noted that it is only in effect for 12 months. “As tuitions continue to skyrocket, Congress needs to stop kicking the can down the road and pass long-term protections now for programs like Stafford Loans and Pell Grants—programs that are keeping the doors to college open for millions of Americans,” according to the statement.
Justin Draeger, president of the National Association of Student Financial Aid Administrators, added: “We are relieved that lawmakers have come to an agreement on the extension. But we have to remember this is a temporary extension and a temporary fix. We are hopeful that Congress will build on this momentum to engage in a long-term solution to make loans more understandable, affordable, and predictable.”
Anne Johnson, director of Campus Progress at the Center for American Progress, a Washington think tank, says that with the vote, millions of students will be able to return to school knowing that they will be able to afford their education. “This is a huge victory for the more than seven million students and their families who would have been impacted by the rate doubling. These loans are a critical lifeline for so many American families who rely on federal loans to pursue a higher education,” she said in a statement.
Photo: House Speaker John Boehner, R-Ohio, joined by other House GOP leaders, faces reporters at a news conference following a political strategy session, on Capitol Hill in Washington on Wednesday. Boehner defended the contempt of Congress vote against Attorney General Eric Holder, commented on the looming Supreme Court decision on the health care, and updated progress on student loans and the transportation bill. From left to right are House Majority Leader Eric Cantor, R-Va., Boehner, Rep. Renee Ellmers, R-NC, and Rep. Jeb Hensarling, R-Texas. (J. Scott Applewhite/AP)
A version of this news article first appeared in the College Bound blog.