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Cost Estimate Threatens Student Loan Compromise

Cost Estimate Threatens Student Loan Compromise
July 12, 2013

A tentative deal reached late Wednesday night to tie interest rates on federal student loans to the market seemed ready to collapse late Thursday, after the Congressional Budget Office estimated the compromise's costs at $22 billion over 10 years, The New York Times reported. The proposal worked out in Wednesday's compromise would tie interest rates on subsidized undergraduate Stafford loans to the yield on 10-year Treasury bills plus 1.8 percentage points (rates for graduate and PLUS loans would be slightly higher), and the rates for all loans would be capped. But the carefully arranged deal, in which Congressional Democrats gave the most ground, could be threatened by the higher-than-expected cost estimate, which would make the loans unprofitable for the government. “It’s going to be difficult to find a middle ground,” one Democratic aide told the Times.

 

 

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