Wednesday evening, the Senate made a decisive move about the fate of student loan interest rates, which rose to 6.8% from 3.4% on July 1st of this year.
The bill, which is now headed to the House of Representatives, will lower interest rates for college borrowing to 3.9%, 5.9% and 6.4% for undergraduate students, graduate students and parents, respectively. These rates will be tied to the interest rate on money borrowed from the federal government, and thus are expected to increase as the economy improves, CBS News reports.
However, Democrats insisted that caps be imposed so student loan rates wouldn’t go through the roof. Undergraduate rates are capped at 8.25%, graduate student rates are capped at 9.5% and rates for parents are capped at 10.5%.
Elizabeth Warren Speaks Out Against the Bill
The bill triumphed in the Senate despite ardent opposition by Senator Elizabeth Warren, a Democrat from Massachusetts, who said, “I understand that compromise isn’t always pretty, but there isn’t any compromise in this bill.”
Warren, who made lowering student loan rates a major part of her campaign last year, takes issue with the bill because of the revenue it creates for the government from the wallets of American students. In an email to bill supporters, she said that if the bill passes, it could generate $184 billion in profit.
“I can’t support a proposal that squeezes even more profits out of our kids,” she wrote in the email. “In fact, I think this whole system stinks.’’
Warren and her supporters—largely other Democrats from New England—would like to extend the previous interest rate of 3.4% for one more year while congressmen create a long-term solution wherein the government doesn’t profit from student loans.
Unfortunately for Warren and her supporters, MSN Money reports that the bill will face an “easy path” to passage in the House. President Obama called the bill a “major victory” for students in the U.S., and stated that he hopes the House passes the bill as well so he can sign it into law immediately.