On Wednesday night, a bipartisan deal emerged to reverse a doubling of loan rates for federally subsidized student loans. Rates were supposed to increase from 3.4 to 6.8 percent after July 1. Instead, according to an Associated Press report, students would pay 3.85 percent in the fall in a deal senators hammered out but have not voted on.
Here is what’s in the deal from the AP report:
“The interest rates would be linked to financial markets, but Democrats won a protection for students that rates would never climb higher than 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.”
Let’s hope that Congress finds a way to avoid eating our young.
Our editorial board called on Congress to prevent the doubling of the loan rates back in an April editorial.”
As I wrote in my column “A millennial voter’s manifesto for 2013,” young people have taken the brunt of the recession thanks to increasing student-loan rates and mounting debt. The average Washington student graduated in 2011 with more than $22,000. A graduate I quoted in that column had student loan payments totaling $1,000 a month.
It’s hard to envision when you’re in college. But at some point you may want to buy a car. When it comes time to take out a loan, the interest rate you pay, and how much car you are able to afford, will depend on how much you owe in student loans. Or a college graduate may decide he or she wants to buy a house (against the urging of my July 2 column “Why you should not buy a house.”) Whether you qualify for a mortgage and again, how much house you can afford, will be based on how much debt you owe in student loans.
So the actions of Congress now on student loan rates would ripple 15 years into that college student’s life.
The compromise deal would only last through the 2015 school year, the AP report said. That’s not the predictability that students and parents need. Our goal should not be to make college affordable for two years. A bachelor’s degree takes four, often five years to attain. But it’s at least a reprieve.