The U.S. Senate passed a compromise measure to lower student loan interest rates.
The plan reduces rates for undergraduates and grad students enrolling in Alaska colleges this fall.
Subsidized Stafford Loans, which go to lower and middle income students – doubled on July 1 because Congress failed to act on time.
The compromise passed on Wednesday night retroactively applies to loans taken out since that increase.
The undergraduate rate will be three point nine percent. But that could increase, because it’s pegged to market rates. It comes with an eight point two five percent cap.
That’s something Senator Lisa Murkowski supports.
“Is it permanent? Yes. Does it provide for all student loans? Yes. Does it provide a cap, so there’s some certainty for the student and their families? Yes,” Murkowski said.
The debate dragged on for more than a year. Congress delayed the rate increase last summer – nobody wanted to vote on it in the middle of the presidential campaign.
For the first time – Congress will be out of the rate setting business. The plan permanently ties interest rates to the Treasury note. It also creates a tiered system for undergrads, graduate students, and PLUS loans.
Senator Mark Begich voted with liberals on two amendments that ultimately failed. One would have ended the new rates in two years. The other would have locked in today’s rate permanently.
He supported the final package, but says it only address one element of financing college.
“We still have a longer term issue,” Begich said. “We have $1.2 trillion worth of debt that people are carrying on student loans.”
“They should be able to refinance at a much lower rate.”
That’s an issue that will likely come up next year and it’s possible the rates will to, even though Senators are touting them as permanent. Congress needs to reauthorize the Higher Education Act.
Before that, the fix needs to pass the House. Leaders there say that will happen early next week.