U.S. House Approves GOP Student Loan Bill

May 24, 2013
USA Today 
student loan news

The House of Representatives on May 23 passed a proposal that would link future interest rates on federal Stafford student loans to the market instead of allowing political whims to dictate them. The GOP-sponsored measure would tie the rates to that of the 10-year Treasury note plus 2.5 percentage points and would limit the rate to no more than 8.5 percent. The bill would address a scheduled hike in Stafford rates on July 1 but is not likely to win approval, due to Democratic opposition in the Senate and the White House's threat of a veto. Democrats, who liken the Republican plan to predatory adjustable-rate mortgage practices that contributed to the housing collapse, are more inclined to support the president's plan. Obama proposes to set Stafford rates at slightly less than 1 percent higher than the Treasury note rate and to fix initial interest rates for the life of the loan -- unlike the GOP plan, which would reset the loan rate for borrowers each year based on market fluctuations. If the parties cannot reach a compromise, interest on Stafford loans will double to 6.8 percent in July from 3.4 percent.
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