Going Beyond Interest Rates
"Another legislative deadline for federal financial aid is looming in this town of perpetual crisis: the interest rate on subsidized student loans will double July 1, from 3.4 percent to 6.8 percent, if there is no Congressional action," Inside Higher Ed reports. "Last year, when loan rates were scheduled to double, President Obama seized on the issue in his re-election campaign, and Democrats and Republicans in Congress quickly agreed that the interest rate for subsidized loans (a need-based program under which the government pays the loan interest while students are enrolled in college) needed to be kept down. Student activists jumped into the argument, and Congress found a one-year fix to keep interest rates low at a cost of $6 billion. This year, the situation seems different. A hearing Wednesday indicated that members of Congress from both parties are interested in thinking bigger when looking at the federal student loan programs -- either in a bill to avoid the interest rate hike for subsidized loans, or when the Higher Education Act is (eventually) renewed. … Justin Draeger, president of the National Association of Student Financial Aid Administrators, also called for a “long-term, market-based solution” basing the rate from year to year on the cost of capital, servicing and loan counseling, and financial risk."
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