Whether you’re in the midst of a medical assisting program or taking dental assisting classes, there’s one thing that has been on the minds of many students this summer: Student loan interest rate hikes.
College students who rely upon student loans to pay for things like tuition and materials have expressed concern that the interest rates on federal student loans would rise exponentially if Congress was unable to pass legislation reversing the automatic doubling of subsidized Stafford loan rates to 6.8 percent that took place in June.1
After several months of heated debates between Democrats and Republicans, the two parties were finally able to come to an agreement and passed a bipartisan bill lowering interest rates for subsidized Safford loans to 3.86 percent for loans first disbursed between July 1, 2013 and June 30, 2014. The plan came from the Senate and was overwhelmingly passed in the U.S. House by a vote of 392 to 31.2
Upon being signed by President Barack Obama, the legislation will affect millions of college students across America who rely on federal student loans to pay for school. The student loan interest rates will be linked to the financial markets, which means they will likely rise as the economy improves.3
However, when students take out a loan the interest rate will be locked in for the lifetime of that loan. In addition, Congress has specified a maximum allowable interest rate that cannot be exceeded – for undergraduates students, it’s 8.25 percent. 4 The interest rates are expected to adjust each July.
It is unclear whether this will be the permanent plan for addressing student loan interest rates. While some members of Congress believe the legislation is an effective long-term fix, others have expressed concern that it does not provide enough relief for students, who will face increasing rates as the economy improves.
“The bill provides American college student immediate debt relief on upcoming student loans,” Rep. George Miller, a senior Democrat at the House Committee on Education and the Workforce, told Reuters. “Families battered by the recent recession should have received this relief over a month ago.”
The new rates will apply to all federal student loans taken out since July 1, 2013.5
1 Nawaguna, Elvina, Reuters, ‘Congress finally votes to cut student loan interest rates,’ July 31, 2013 – http://www.reuters.com/article/2013/07/31/us-usa-studentloans-rates-idUSBRE96U1G220130731
2 Johnson, Jenna, The Washington Post, ‘Congress approves student loan plan,’ July 31, 2013 – http://www.washingtonpost.com/politics/congress-approves-student-loan-plan/2013/07/31/e3df776a-f9f4-11e2-8752-b41d7ed1f685_story.html
3 CBS News, ‘After delays, student loan fix clears Congress,’ July 31, 2013 – http://www.cbsnews.com/8301-250_162-57596441/after-delays-student-loan-fix-clears-congress/
4 Johnson, Jenna, The Washington Post, ‘Congress approves student loan plan,’ July 31, 2013 – http://www.washingtonpost.com/politics/congress-approves-student-loan-plan/2013/07/31/e3df776a-f9f4-11e2-8752-b41d7ed1f685_story.html
5 Johnson, Jenna, The Washington Post, ‘Congress approves student loan plan,’ July 31, 2013 – http://www.washingtonpost.com/politics/congress-approves-student-loan-plan/2013/07/31/e3df776a-f9f4-11e2-8752-b41d7ed1f685_story.html