By Susan Davis, USA TODAY
strong opposition from liberals, the Democratic-controlled U.S. Senate
approved a bill Wednesday to tie federal college loan rates to financial
markets to retroactively roll back an unpopular July 1 rate hike.
The bipartisan legislation was approved 81-18.
GOP-controlled U.S. House is expected to approve the legislation before
the August recess. President Obama supports the bill and commended the
bipartisan effort that produced it, the White House said in a statement
issued Wednesday. The legislation will affect seven million students
heading to college this fall.
The bill will bring down interest
rates for subsidized Stafford loans in the short-term. These rates
doubled to 6.8% on July 1 because Congress could not come to terms on an
agreement ahead of that deadline. Under the legislation, undergraduates
will be able to borrow at 3.9% for this school year; graduate students
at 5.4%, and parents at 6.4%.
Liberal Democrats are wary that the
legislation could allow interest rates to rise above 6.8% in future
years as the financial markets recover and interest rates rise.
truth of the matter is, if the bill on the floor passes without
amendment, it would be a disaster for the young people of our country
who are looking to go to college and for the parents who are looking to
help pay their bills," said Sen. Bernie Sanders, I-Vt., who voted
against the bill. Sanders offered an amendment to sunset the legislation
in two years, but it was rejected.
The legislation includes loan
interest rate caps at 8.25% for undergraduates, 9.5% for graduates, and
10.5% for parents. The non-partisan Congressional Budget Office
estimates rates would not hit the rate caps within the next decade.
effort by Sens. Jack Reed, D-R.I., and Elizabeth Warren, D-Mass., to
put tighter interest rates caps on student loans was also rejected. Reed
and Warren also voted against the bill.
Instead of Congress
continuing to set interest rates on student loans, future borrowers will
see their loans tied to the U.S. Treasury 10-year borrowing rate. The
legislation creates a three tier systems, to charging an additional
1.85% for undergraduate Stafford loans, 3.4% for graduate Stafford
loans, and 4.4% for PLUS loans, which parents can take for their
children. The interest rate would be fixed over the life of the loan.
legislation provided a rare area of accord between the Obama
administration and congressional Republicans. The president included a
similar proposal in his budget this year, which House Republicans touted
in initial legislation.
House Speaker John Boehner's office noted
the similarities between the House GOP proposal and the final bill. "A
victory indeed, and one that shows when we have common ground, we should
seize it on behalf of the people we serve," said a blog posted
Wednesday on the speaker's official Web site.