Late this week, the stalemate in the U.S. Senate over student loan rates seemed to continue when a bill that would restore a low interest rate on one type of federal student loan for another year failed to clear a procedural hurdle, sending the issue back to the negotiating table as lawmakers try to reach a consensus before the August recess. FIU’s Federal Relations team continues to advocate for a permanent decision on this and the other major source of financial aid for FIU students – Pell Grants.
STUDENT LOAN INTEREST RATE INCREASE
Stafford Loan interest rates doubled last week to 6.8 percent. For two years, the rate had been 3.4 percent. That rate expired July 1 when lawmakers failed to reach an agreement. Currently, a new bipartisan bill is being negotiated that would tie rates for all Stafford loans to the 10-year Treasury note plus 1.8 percent with an annual interest rate cap of 8.25 percent. This would give loans a 3.61 percent interest rate. Graduate student loans would be set at the 10-year yield plus 3.8 percent and capped at 9.25 percent, which would yield a 6.31 percent rate currently under the plan.
This bill is very similar to a previous House proposal and thus, should it pass the Senate, has a very high possibility of ultimate enactment.
Earlier in the week, in a 51-49 vote, the Keep Student Loans Affordable Act (S.1238) did not get the opportunity to be heard on the floor. The bill would have paid for maintaining the original interest rates by closing certain tax loopholes.
Congressional action would have to take place by the first week of August to positively impact students as the Fall semester nears. At FIU, more than 21,000 students have a Stafford Loan – with an average indebtedness of $16,000.
While news about student loan rates was less than desirable, students received some consolation in the Senate FY14 Labor, Health, Human Services, and Education Appropriations Bill – in which an increase in Pell Grants was proposed. The bill calls for an increase of $140 from its current maximum to a new maximum of $5,785.
Although the House’s proposal has not been released, if enacted, this would be good news for FIU students, of which 16,146 (37 percent) depended on the Federal Pell Grant to help pay for their studies and 8,752 (20% of total population, 54 percent of recipients) qualify to receive the maximum Pell award.
For more information on overall impact of federal financial aid, visit FIU’s Governmental Relations site.