The House of Representatives voted to approve the Bipartisan Student Loan Certainty Act yesterday with a 391-31 vote, sending the legislation to President Barack Obama's desk for a signature.
The action followed months of partisan bickering, with Democrats and Republicans blaming each other for a politically embarrassing delay that had the potential to cost students and their parents thousands of dollars.
The legislation replaces a system in which Congress fixed interest rates every year and substitutes it with a market-based mechanism tied to the government's cost of borrowing and capped to protect borrowers in the event of a severe spike in rates.
While the legislation reverses a hike in student-loan rates that had kicked in earlier this summer when lawmakers were unable to come to a deal, there's a serious downside in the future, according to the Associated Press:
Undergraduates this fall would borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last. Rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.
Southern Arizona's congressional members split on the vote.
Congressman Raul Grijalva voted against it.
“This bill means students will pay $715 million more down the road than they would if current rates, which recently doubled for new borrowers, stayed untouched," Grijalva said in a prepared statement. "Today we reverse the July 1 student loan interest rate hike at the cost of ultimately charging students more over the next decade.
“We need to make student loans more accessible to students and easier to pay back," Grijalva added. "In this country, in our economy, students should not have to agonize over whether to go to college because of our nation’s crushing student debt problem.”
Congressman Ron Barber voted for the legislation, but said it was flawed.
“I voted for this bill today, to create certainty for students as they enter this school year, but it is far from the right answer for students,” Barber said in a press release. “In the long run, we need a better solution that will protect students from high interest rates and ensures that rates remain stable. This bill fails to do that. I call on leadership in the House and Senate to come back to the table and pass real protections for students that will keep college affordable.”
The New York Times notes that there was political pressure to make the deal before the August recess:
Student loan rates doubled on July 1 because Congress could not come up with a plan to replace student lending laws that had expired.
Failing to act on a compromise before the end of this week would have left legislators heading home for a monthlong recess to face constituents already disillusioned over dysfunction and inaction in the Capitol. None wanted to face criticism that they were so inept that they could not protect middle-class families from paying double what they used to pay to borrow money for college.