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Continued: Interest rates on new college student loans double, but Congress could restore low rates later

  • Article by: PHILIP ELLIOTT , Associated Press
  • Last update: July 1, 2013 - 2:55 PM

"This doesn't decrease the dollars available to pay for college. It increases the cost of the loan," he said.

Both political parties tried to blame the other for the hike and student groups complained the increase in interest rates would add to student loan debt that already surpasses credit card debt in this country.

Lawmakers knew for a full year the July 1 deadline was coming but were unable to strike a deal to dodge that increase. During last year's presidential race, both parties pledged to extend the 3.4 percent interest rates for another year to avoid angering young voters.

But the looming hike lacked sufficient urgency this year and Congress last week left town for the holiday without an agreement. Instead, the Democratic-led Senate pledged to revisit the issue as soon as July 10 and retroactively restore the rates for another year — into 2014, when a third of Senate seats and all House seats are up for election.

At the White House, a spokesman predicted a deal could be reached before students return to campus.

"We are confident they will get there and that the solution will include retroactive protection for students who borrow after July 1 so that their student loan rates don't double," Matt Lehrich said.

Even when lawmakers return, there's no guarantee there will be the votes to restore the lower rates.

"When we pass a deadline and there are not immediate effects, the sense of urgency that accompanies a deadline evaporates and that is what I'm afraid will happen here," Hartle said.

For months, the student loan issue was the subject of partisan sniping — sometimes within the same party.

Obama's budget proposal included a measure that would have linked student loan interest rates with the financial markets. Fellow Democrats called that unacceptable because there were no guarantees interest rates would not skyrocket if the economy improves.

The Republican-led House, meanwhile, co-opted the president's proposal and passed a bill in May that linked interest rates to the financial markets but with a cap on how high rates could climb.

The Democratic-led Senate, meanwhile, tried for a two-year extension that failed to overcome a procedural hurdle. A Republican measure, similarly, came up short.

Top White House officials told allies to find any deal that could win enough votes and avert the politically and fiscally costly doubling.

An attempt at a bipartisan agreement fizzled last week when the Democratic chairman of the Senate education panel, Sen. Tom Harkin of Iowa, declared it a non-starter and urged lawmakers to extend the rates for one more year — when they get back next week.

Back on the University of Iowa campus in Iowa City — where Obama campaigned against a rate hike last year — senior Julia Vander Wilt seemed resigned to the higher costs for her subsidized Stafford loans.

"It's a little bit insane that we're paying so much," the 22-year-old student said. "But I don't know if there's really anything I can do about it."

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