R.I. Senator Works To Manage Interest Rates On Student Loans
"After interest rates on federal student loans temporarily doubled from 3.4 to 6.8 percent in July, the U.S. House and Senate voted to pass a bipartisan bill tying student loan interest rates to market rates, rejecting a plan proposed by Sen. Jack Reed, D-R.I., that would have frozen the rate at 3.4 percent for another year," The Brown Daily Herald reports. "Though undergraduate loan interest rates are currently at 3.86 percent, they are projected to rise with the market environment, potentially reaching the law’s prescribed caps — set at 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for parents. Reed said he worries that if the rates on federal student loans approach the caps established by current legislation, the effects for students and their families in the short-term, as well as for society in the long-term, could be devastating. ... A market-tied system also has benefits for students and parents because student loan rates 'are more predictable and understandable,' said Megan McClean, director of policy and federal relations at the National Association of Student Financial Aid Administrators. 'If you have a broader sense of what’s going on, you can take the temperature of the economy and predict what the rates will be,' McClean said. 'Before, it wasn’t connected to the outside world.' NASFAA views the current legislation as a 'strong piece of legislation that is good for all borrowers,' McClean said. While past legislation, including the one-year freeze of interest rates at 3.4 percent last year, protected only Stafford loans, the new legislation 'made the rates more affordable for everyone, not just the subsidized loan borrowers,' she said. Data shows that 80 percent of NASFAA’s subsidized borrowers also borrow unsubsidized loans, McClean added."
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