Repubs in House Pass Student Loan Bill That Will Raise Interest Payments by Students by 35 percent

The Republicans in the US House just passed a bill that would turn all federal student loans into variable interest rate loans. If the Treasury bond rate increases over time (which is expected), then a loan taken out this Sept. would be allowed to increase over time to 8.5% for undergrads and to 10.5% for loans issued to parents and grad and professional students.

The highest interest rate that is currently charged is 7.9% for parent and grad PLUS loans. The rate for federal subsidized stafford loans for the last few years has been 3.4%, which is a few points higher than the rate for federal loans loans to banks.

It was a party line vote.

The Congressional Research Service analyzed the likely effects for an undergrad student who takes out the maximum amount of federal Stafford loans over 4 years. They found that the Repub bill would be expected to increase that student's total interest payments by 35% compared to current interest rates on those loans.

http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/documents/Student%20Loan%20Interest%20Rate%20Analysis%20-%20Current%20Law%20and%20HR%201911.pdf

The President is calling for market-based student loan interest rates, but under the President's plan, once a loan was taken out, the interest rate would not increase over the life of that loan. Instead, students would know the interest rate when they took out the loan.