Relief could be on the way for borrowers stunned by
student loan rates that abruptly doubled this month.
A bipartisan group of senators has reached a deal with the White House to bring down student loan rates that jumped from 3.4 percent to 6.8 percent.
The deal provides only temporary relief. It would lead to higher rates as the economy improves.
"While this isn't the agreement any of us would have written -- and many of us would like to see something quite different -- I believe we have come a long way in reaching common ground on a very, very difficult and challenging topic," Majority Whip Dick Durbin, D-Ill., told reporters Thursday.
A floor vote is expected next week.
Under the compromise, rates would be tied to 10-year treasury bills, making them 3.86 percent this autumn for subsidized and unsubsidized undergraduate loans.
The rate would be in effect for the life of the loan.
Parents borrowing money for dependent children's tuition would pay 6.41 percent for loans taken out this fall. The current rate is 7.9 percent.
For most graduate students, who currently borrow at 6.8 percent, rates would drop to 5.41 percent.
Future borrowers, though, would end up paying more as treasury bill rates rise.
Congressional aides estimate that rates could reach 7.25 percent for undergraduate students, 8.8 percent for graduate students and 9.8 percent for parents within five years.
Lawmakers negotiated caps to prevent those rates from increasing beyond 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for parents.
The proposal is similar to legislation that the House passed on a party-line vote in May. A key difference is that the Senate bill allows students to lock in rates at the time they borrow, while in the House version rates would fluctuate over the life of the loan.
House Speaker John Boehner, R-Ohio, seemed confident the differences could be worked out.
Both proposals are "market-based reforms with market-based rates," he noted during his weekly briefing with Capitol reporters. "When we see the details I'm hopeful that we'll be able to put this issue behind us."
In announcing the agreement, negotiators praised each other for bipartisanship and flexibility, but in a floor speech later, other senators decried the proposal.
Sen. Elizabeth Warren, D-Mass., said she can't support the legislation because it increases the government's profit on interest rates.
The government is on target to reap $814 billion in student-loan interest over the next decade, according to the Congressional Budget Office. The compromise would add about $715 million to that.
"That comes directly off the backs of our students," Ms. Warren said. "We need to take steps now to lower the profit we make off the backs of our kids."
Sen. Bernie Sanders, D-Vt., had similar concerns.
"You're making a profit off low- and moderate-income people who want to send their kids to college. I can think of better ways to make money to help with the deficit than to force low- and moderate-income parents and students to pay more than they should be paying," he said.
Mr. Durbin said he doesn't want the government to profit from students, either, but $715 million is "a tiny fraction of decimal dust" in the context of $1.4
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