President Obama will sign Congress’s compromise bill that will reduce federal student-loan interest rates tomorrow, White House press secretary Jay Carney said Thursday.
In an announcement prior to the daily press briefing, Carney said the bill will “save millions of students an average of $1,500 on loans they take out this year.”
The bill, sponsored by Republican representative John Kline (Minn.), is designed to establish lower interest rates for new student loans. Rates for federally subsidized Stafford loans doubled on July 1 from 3.4 percent, a temporary reduced rate, to 6.8 percent.
The bill will peg the rate for federal loans issued in a given year to the yield on the ten-year Treasury note that year, adding 2.05 percentage points for undergraduate loans and more for graduate-school loans. Under the new system, newly issued undergraduate loans this year will have an annual interest rate of 3.86 percent. In addition, the now-variable interest rates are capped at 8.25 percent for undergraduates, 9.5 percent for graduate students, and 10.5 percent for parents.
Obama had previously threatened to veto the bill because it originally allowed rates on issued loans to vary with Treasury rates over time (which the final bill does not do) and would “not guarantee low rates” for current students. The administration charged that the bill “would impose the largest interest rate increases on low- and middle-income students and families who struggle most to afford a college education.” Republicans had seized on his opposition and the Democratic Senate’s intransigence on the bill, criticizing them for allowing rates to rise and refusing to pass the Republican proposal to fix the situation.
However, the bill passed both chambers of Congress easily, blitzing through the House for a second time in late July by a 392–31 vote a week after passing the Senate 81–18.