Months of disputes finally came to an end on Friday when, just two days before its deadline to act, Congress passed a measure to keep subsidized student loan interest rates from doubling to 6.8 percent.
The new bill extended the deadline of a 2007 law, which lowered the subsidized Stafford loan interest rate to its current 3.4 percent, by one year. The 2007 law was set to expire on Sunday.
Without the extension, the interest rate would have reverted to the rate of 6.8 percent, costing 7.4 million borrowers an extra $1,000 each on average, according to an estimate from the Obama administration.
The recently signed measure is part of a larger legislative package compiled by Congress in the wake of fast-approaching deadlines ”“ days before a week-long July 4 recess and four months before the upcoming November election.
After much partisan dispute on how the bill would be funded, the Republican-led House passed the vast bill by a 373-52 vote, which was shortly approved by a 74-19 vote in the Democrat-led Senate.
“We were hopeful and optimistic that Congress would reach agreement,” said Chris Harrington, associate director at the UC Office of the President’s Office of Federal Governmental Relations. “We’re pleased that Congress recognized the importance of keeping the interest rate low and helping students.”
The cost of extending the current student loan interest rate is estimated to be $6 billion, according to the Associated Press. To cover the cost, undergraduates will begin accruing interest after six years of being in school, and companies will change how they calculate the amount of funds they contribute toward their employees’ pensions.
Congress, however, has not decided on any long-term solution to keep the interest rates low once the temporary one-year extension ends.
Gary Orfield, a professor of education and political science at UCLA, said the bill is a “quick fix” for the issue just before the presidential elections in November but anticipates the problem will resurface yet again in another year.
The bill is the result of a compromise reached between Democrats and Republicans last week.
This kind of bipartisan collaboration is uncommon, especially with the current Congress, which is strongly divided between more extreme conservatives and moderate liberals, said Mark Peterson, UCLA professor of public policy, political science and law.
“This is not a conducive environment to accomplishing very much,” he said.
With the fast-approaching deadlines and the potential for aggravating student voters months before the upcoming election had the compromise failed, the legislators buckled down to pass the bill at the last minute, Orfield said.
“It’s great that the Senate was able to avoid doubling student loan interest rates, but they shouldn’t get all that much credit for simply averting a catastrophe,” said UC student regent Jonathan Stein in an email. Stein said he believes Congress needs to make a larger effort to make college more affordable.
Lana Habib El-Farra, external vice president of the undergraduate student government, said that though the bill’s passage was a victory for students, the fact that the measure came last minute created a stressful situation for many of them.
“The fact that it happened late is kind of a shame,” El-Farra said. “It’s something that (lawmakers) should’ve worked on a long time ago.”
Along with keeping the current student loan interest rate, the new bill contains provisions for more than $100 billion to fund already-existing highway, mass transit and other transportation projects throughout the country, which were expected to expire Saturday and subsequently cause the loss of millions of jobs. The bill also includes a five-year extension of federal flood insurance subsidies.
Orfield said the compromise also likely occurred because President Barack Obama made college affordability a visible election topic. In the spring, Obama spoke about the issue on multiple college campuses in various swing states.
A press release from the White House applauded the bill’s passage in Congress. President Obama temporarily extended the funding for the loans and transportation projects to last another week until the entire bill is ready to be signed into law.