House approves lower rates on student loans

WASHINGTON — A bipartisan bill that would reduce the costs of borrowing for millions of students passed the House on Wednesday and was heading to President Barack Obama for his signature.

The legislation links student loan interest rates to the financial markets, offering lower rates for most students now but higher ones down the line if the economy improves as expected. Even as they were preparing to pass the bill, many lawmakers were already talking about a broader overhaul of the nation’s colleges to curb fast-climbing costs.

“Going forward, the whims of Washington politicians won’t dictate student loan interest rates, meaning more certainty and more opportunities for students to take advantage of lower rates,” House Speaker John Boehner said.

The measure passed 392-31.

Undergraduates this fall would borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last. Rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.

But for now, interest payments for tuition, housing and books would be less expensive under the House-passed bill.

“Changing the status quo is never easy, and returning student loan interest rates to the market is a longstanding goal Republicans have been working toward for years,” said Rep. John Kline, the Republican chairman of the House Committee on Education and the Workforce. “I applaud my colleagues on the other side of the aisle for finally recognizing this long-term, market-based proposal for what it is: a win for students and taxpayers.”

The House earlier this year passed legislation that is similar to what the Senate later passed. Both versions link interest rates to 10-year Treasury notes and remove Congress’ annual role in determining rates.

“Campaign promises and political posturing should not play a role in the setting of student loan interest rates,” said Rep. Virginia Foxx, R-N.C. “Borrowers deserve better.”

Negotiators of the Senate compromise were mindful of the House-passed version, as well as the White House preference to shift responsibility for interest rates to the financial markets. The resulting bipartisan bill passed the Senate 81-18.

With changes made in the Senate — most notably a cap on how interest rates could climb and locking in interest rates for the life of each year’s loan — Democrats dropped their objections and joined Republicans in backing the bill.

Interest rates would not top 8.25 percent for undergraduates. Graduate students would not pay rates higher than 9.5 percent, and parents’ rates would top out at 10.5 percent. Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.

The White House endorsed the deal over objections from consumer advocates that the proposal could cost future students.

“The bottom line is that students will pay more under this bill than if Congress did nothing, and low rates will soon give way to rates that are even higher than the 6.8 percent rate that Congress is trying to avoid,” said Chris Lindstrom, higher education program director for the consumer group US PIRG.

Rates on new subsidized Stafford loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at 3.4 percent. Without congressional action, rates would stay at 6.8 percent — a reality most lawmakers called unacceptable.

The compromise that came together during the last month would be a good deal for all students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct.

The White House and its allies said the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate $1,500 in interest charges.

In all, some 18 million loans will be covered by the legislation, totaling about $106 billion this fall.

“Finally, we are taking action on the pressing issue of college affordability,” said Rep. Jared Polis, D-Colo. “We have to make sure our students are able to plan their futures.”

Lawmakers were already talking about changing the deal when they take up a rewrite of the Higher Education Act this fall. As a condition of his support, Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin won a Government Accountability Office report on the costs of colleges. That document was expected to guide an overhaul of the deal just negotiated.

“We will have the ability to come back and look,” said Rep. Sheila Jackson Lee, D-Texas.

The Congressional Budget Office estimated the bill would reduce the deficit by $715 million over the next decade. During that same time, federal loans would be a $1.4 trillion program.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A firefighter stands in silence before a panel bearing the names of L. John Regelbrugge and Kris Regelbrugge during the ten-year remembrance of the Oso landslide on Friday, March 22, 2024, at the Oso Landslide Memorial in Oso, Washington. (Ryan Berry / The Herald)
‘Flood of emotions’ as Oso Landslide Memorial opens on 10th anniversary

Friends, family and first responders held a moment of silence at 10:37 a.m. at the new 2-acre memorial off Highway 530.

Julie Petersen poses for a photo with images of her sister Christina Jefferds and Jefferds’ grand daughter Sanoah Violet Huestis next to a memorial for Sanoah at her home on March 20, 2024 in Arlington, Washington. Peterson wears her sister’s favorite color and one of her bangles. (Annie Barker / The Herald)
‘It just all came down’: An oral history of the Oso mudslide

Ten years later, The Daily Herald spoke with dozens of people — first responders, family, survivors — touched by the deadliest slide in U.S. history.

Victims of the Oso mudslide on March 22, 2014. (Courtesy photos)
Remembering the 43 lives lost in the Oso mudslide

The slide wiped out a neighborhood along Highway 530 in 2014. “Even though you feel like you’re alone in your grief, you’re really not.”

Director Lucia Schmit, right, and Deputy Director Dara Salmon inside the Snohomish County Department of Emergency Management on Friday, March 8, 2024, in Everett, Washington. (Ryan Berry / The Herald)
How Oso slide changed local emergency response ‘on virtually every level’

“In a decade, we have just really, really advanced,” through hard-earned lessons applied to the pandemic, floods and opioids.

Ron and Gail Thompson at their home on Monday, March 4, 2024 in Oso, Washington. (Olivia Vanni / The Herald)
In shadow of scarred Oso hillside, mudslide’s wounds still feel fresh

Locals reflected on living with grief and finding meaning in the wake of a catastrophe “nothing like you can ever imagine” in 2014.

The rezoned property, seen here from the Hillside Vista luxury development, is surrounded on two sides by modern neighborhoods Monday, March 25, 2024, in Lake Stevens, Washington. (Ryan Berry / The Herald)
Despite petition, Lake Stevens OKs rezone for new 96-home development

The change faced resistance from some residents, who worried about the effects of more density in the neighborhood.

Rep. Suzan DelBene, left, introduces Xichitl Torres Small, center, Undersecretary for Rural Development with the U.S. Department of Agriculture during a talk at Thomas Family Farms on Monday, April 3, 2023, in Snohomish, Washington. (Olivia Vanni / The Herald)
Under new federal program, Washingtonians can file taxes for free

At a press conference Wednesday, U.S. Rep. Suzan DelBene called the Direct File program safe, easy and secure.

Former Snohomish County sheriff’s deputy Jeremie Zeller appears in court for sentencing on multiple counts of misdemeanor theft Wednesday, March 27, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
Ex-sheriff’s deputy sentenced to 1 week of jail time for hardware theft

Jeremie Zeller, 47, stole merchandise from Home Depot in south Everett, where he worked overtime as a security guard.

Everett
11 months later, Lake Stevens man charged in fatal Casino Road shooting

Malik Fulson is accused of shooting Joseph Haderlie to death in the parking lot at the Crystal Springs Apartments last April.

T.J. Peters testifies during the murder trial of Alan Dean at the Snohomish County Courthouse on Tuesday, March 26, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Bothell cold case trial now in jury’s hands

In court this week, the ex-boyfriend of Melissa Lee denied any role in her death. The defendant, Alan Dean, didn’t testify.

A speed camera facing west along 220th Street Southwest on Tuesday, Nov. 21, 2023 in Edmonds, Washington. (Olivia Vanni / The Herald)
New Washington law will allow traffic cams on more city, county roads

The move, led by a Snohomish County Democrat, comes as roadway deaths in the state have hit historic highs.

Mrs. Hildenbrand runs through a spelling exercise with her first grade class on the classroom’s Boxlight interactive display board funded by a pervious tech levy on Tuesday, March 19, 2024 in Marysville, Washington. (Olivia Vanni / The Herald)
Lakewood School District’s new levy pitch: This time, it won’t raise taxes

After two levies failed, the district went back to the drawing board, with one levy that would increase taxes and another that would not.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.