It wasn't pretty, and advocates for students aren't happy with it. But after almost two years of fits and false starts, Congress on Wednesday passed legislation that would tie interest rates on federal student loans to the market and, at least in the short term, forestall hefty increases that were to hit new borrowers beginning this fall.
The legislation passed the House of Representatives by a wide margin (392-31, with 10 abstentions) after originating in the Senate, which approved it last week. The measure, when signed by President Obama, will reset interest rates on federally guaranteed loans each July based on the previous May's auction of 10-year Treasury bills. Undergraduate loans -- those that are federally subsidized as well as those that are not -- would be set at the Treasury rate plus 2.05 percentage points, while loans for graduate students would be set at 3.6 points above the Treasury rate, and loans for parents at 4.6 percentage points over the T-bill rate. The maximum rate would be capped at 8.25 percent for undergraduate loans, 9.5 percent for graduate student loans, and 10.5 percent for parent loans.
Even as both chambers overwhelmingly backed the compromise, the parties continued to bicker about whose previous versions of the bills were worse, and took credit for different parts of the compromise.
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