House Committee on Education and Labor
U.S. House of Representatives
Republicans
Rep. Howard P. “Buck” McKeon
Ranking Member
Fiscally responsible reforms for students, workers and retirees.
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Blog
Speaking of student loan interest rates...
A lot has been said today about the first phase of the Democrats' much-heralded interest rate "cut" taking effect. Specifically, new Subsidized Stafford Loans (federal loans made to lower-income students) issued between today and June 30, 2009 will carry an interest rate of 6.0 percent. And it's true that the 6.0 percent rate is less than the 6.8 percent in effect for loans made last year, and less than the 6.8 percent that Unsubsidized Stafford Loan borrowers -- about half of all Stafford Loans -- will continue to pay on their new loans.
But one thing that has been forgotten is that in 2005, Republicans were advocating for policies that would have produced a far better deal for today's students. Specifically, Republicans advanced legislation through the Education & Labor (then Education & the Workforce) Committee to preserve the student loan program's use of variable interest rates.
Ultimately, the move to a fixed 6.8 percent interest rate -- which had been agreed upon in bipartisan fashion back in 2001 -- took effect, and all Stafford Loans issued on or after July 1, 2006 carried a fixed interest rate. But as Democrats pat themselves on the back for bringing rates down temporarily (gradually reducing over a four year period, before returning to the 6.8 percent level), it's worth considering what might have been if Republicans had prevailed in securing variable rates.
So what would interest rates be today under the Republican plan for variable interest rates? Well, the interest rate on new Stafford Loans for all student borrowers while in school or in their grace period would be 3.61 percent. Those borrowers in repayment would have a slightly higher rate of 4.21 percent. Even parents would have been significantly better off, paying a rate of 5.01 percent instead of the 7.9 - 8.5 percent they're paying on new loans today.
Kind of makes 6.0 percent look expensive, doesn’t it?
| Posted by Press Staff (07-01-2008, 06:30 PM) filed under Education |
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