College students and their parents might be relieved to learn that a bipartisan group of senators has reached a compromise on student loan rates that would be lower than the 6.4 percent they jumped to on July 1.
Unfortunately, rates wouldn’t be as low as the 3.4 percent that borrowers had become accustomed to.
The Associated Press and NBC News report that undergraduates this fall could borrow at a rate of 3.85 percent for Stafford loans. Graduate students would be able to borrow at 5.4 percent and parents of college students would have access to loans at 6.4 percent. Future rates would be linked to the financial markets. Undergrads would pay 2.05 percent plus the rate of the 10-year Treasury note (now 2.49 percent) and graduate students would pay the T-note rate plus 3.6 percent.
Importantly, the agreement also includes rate caps of 8.25 percent for undergrads and 9.5 percent for graduate students.
Pressure has been on both parties in Congress to set affordable rates since before the old undergraduate rate of 3.4 percent doubled to 6.8 percent on July 1. Doubling the rate would have added an estimated $2,600 to college students’ education costs.
What Democrats would get from this compromise is the rate cap they have sought; Republicans would get the tie-in with the financial markets they regard as essential and that President Barack Obama had called for as well. What students and parents would get are borrowing costs that are higher than they have been but lower than they could have been.
The Senate could vote on the measure today, but next week is said to be more likely. The House already has passed a similar bill.
Though lawmakers deserve credit for working out a deal that hopefully meets college students’ needs without adding to the deficit — the proposal actually could reduce the deficit by about $700 million over 10 years — members of both parties were painfully slow to get to this point.
Like this week’s Senate agreement over filibusters of presidential nominees and just about every budget deliberation in recent years, this tentative compromise on student loan rates could have been reached without all the drama and the rhetoric. What’s more, it could have been reached without millions of American families stuck in limbo as they try to budget for another school year.
Just-in-time might be a good way to control inventory, but it’s a lousy way to govern.