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| Don Sholl/Flickr CC |
After dangerously
allowing student loan interest rates to double this summer, congress has
overwhelmingly passed
a bill that ties student loan rates to the financial markets, meaning that
the interest rates are low now, but will increase as the economy improves. The 392 to 31 vote links loan rates to ten
year treasury notes and removes the annual interest rate setting from
congress. In spite of the fluctuations,
the interest rate for undergraduate students would be capped at 8.25 percent, a
compromise insisted on by democrats in order to keep rates from getting out of
control. The strategy follows an
official position by the White House, and the president is expected to sign the
bill into law soon.
The caps are not
satisfying to consumer advocate groups, who criticize the bill by saying it
does not provide protections for interest rates to stay below the 6.8 percent
that it doubled to in early July. A
representative from US PIRG said that if another bill isn’t passed students
will end up paying more than if congress has remained in dead lock. Lawmakers in both parties, however, are
heralding the bill as a victory, even though some of them have already
expressed interest in revising the student loan policy this fall when congress
works on rewriting the Higher Education Act.
Massachusetts
Senator Elizabeth
Warren spoke out very strongly against tying interest rates to financial
markets, saying that it would create a billion dollars in profit off of the
back of students trying to find their way in life. She says the reduction in deficit derived
from the loan rates means that they exploiting students in order to make up for
financial mismanagement.
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