House Passes Bill Tying Student Loan Rates To Treasury Notes

Paying for College
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<p>"Once again, lawmakers are facing a June 30 deadline to figure out how to keep rates on federally subsidized Stafford loans from doubling from 3.4% to 6.8%. The House bill is one proposed long-term solution that proponents say would prevent future 11th-hour short-term fixes.</p>

<p>The Smarter Solutions for Students Act, introduced by Congressman Jon Kline from Minnesota, would link the rates on federal student loans to the yield on the 10-Year note by adding a certain fixed percentage to whatever that yield rate is." ...</p>

<p>House</a> Passes Bill Tying Student Loan Rates To Treasury Notes ? Consumerist</p>

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<p>What about the 6.8% grad students are paying?</p>

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<p>^^and any undergrads with unsub loans</p>

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<p>While I agree the loan rate is wayyy too high, I don’t see lowering it across the board. I support keeping it at 6.8% for grads and unsub if that allows for keeping it subsidized at the lower rate for needy students.</p>

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<p>Needy students could very well be much better off than other less needy students. There may be correlation on the parents income and how the students may do after finishing school, but I am not convinced that it is absolutely the case so I am not sure we should set the rate purely on the parents income. It seems to me after finishing schools, students are mostly on the same footings regardless of their parents income. Same goes for grad students, why do they get to pay a lot more? We should be encouraging getting higher degrees than discouraging it.</p>

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<p>Many of these grad students paying 6.8% are Pell grant recipients, so are they no longer needy?</p>

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<p>^^^^And they wonder why there is a shortage of docs in primary care.</p>

<p>Kat</p>

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<p>The President has called for market based interest rates, but they would be fixed rate loans when taken out. In other words, if the rate is 4.5%, it stays 4.5% for the life of the loan. The republican-passed bill in the House would allow that 4.5% rate loan to increase to 8.5% in future years, and up to 10.5% for grad school loans. Students would have no idea what they would end up paying, and it could be much more expensive than current loans.</p>

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<p>The rates increase during the life of the loan??? What?!</p>

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<p>Do the rates on consolidated loans change now? If one were to consolidate would they go from a set rate to an interest sensitive rate?</p>

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<p>

Yes, see NYTimes.com

Under the House bill, the student lending would become a cash cow to Federal government;

</p>

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<p>What is the “market rate” for an unsecured loan to an 18 year old without a full time job?</p>

<p>My guess is that credit cards that charge 15-20% are probably a reasonable approximation.</p>

<p>This is another example of Congress trying to score political points by taxing an unfavored constituency through the use of absurd regulation.</p>

<p>Only Washington could call something that clearly will lose money a deficit reduction effort.</p>

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<p>I read that article to mean that the rate offered each year on new loans would be based on current interest, but that one’s existing loans would remain at their initial interest rate.</p>

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<p><a href=“House Passes Student Loan Bill, Setting Up Showdown - The New York Times”>House Passes Student Loan Bill, Setting Up Showdown - The New York Times;

<p>The Dems consider college students to be on their core constituencies, and they all voted against this bill.</p>

<p>The Congressional Research Service analyzed the likely effects for an undergrad student who takes out the maximum amount of federal Stafford loans over 4 years. They found that the Repub bill would be expected to increase that student’s total interest payments by 35% compared to current interest rates on those loans.</p>

<p><a href=“http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/documents/Student%20Loan%20Interest%20Rate%20Analysis%20-%20Current%20Law%20and%20HR%201911.pdf[/url]”>http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/documents/Student%20Loan%20Interest%20Rate%20Analysis%20-%20Current%20Law%20and%20HR%201911.pdf&lt;/a&gt;&lt;/p&gt;

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<p>Congress can retroactively reduce the rate, particularly if they do it before most of the loans are disbursed. They really are not that far apart in their proposals.</p>