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U.S. Senate to Vote on Undoing Student Loan Interest Rate Increase

1:59 PM, Jul 24, 2013   |    comments
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Washington - Lawmakers suspect the U.S. Senate will vote Wednesday on a bill that could undo interest rates on student loans that doubled on July 1 when Congress failed to act.
That bill could affect 176,000 North Carolina students who have taken out federal student loans in the past year and also potentially could have an impact on the economy.

A bipartisan group of Senate democrats and republicans proposed this bill, which is similar to an already-passed house bill and President Obama's own proposal. Republican House Speaker John Boehner said he expects the bill will get through the House once if it does pass through the Senate.

In a phone news conference yesterday, Senator Kay Hagan said she would support the bill and also wants democrats and republicans to continue to work together to protect college affordability. She said, "As a member of the Senate committee on health and education, I am committed to working toward greater college affordability. It is my hope that when the committee meets to reauthorize the Higher Education Act, we can work together as was done on this bill-democrats and republicans-to continue to examine ways to keep student interest rates low as our economy improves."

Specifically, the bill would decrease student loan interest rates for 11 million students who have taken or take out new loans after July 1. Nearly 9 million undergraduate borrowers would see their subsidized Stafford loan rates on new loans decrease from 6.8 percent to 3.86 percent. About 1.5 million graduate students who receive unsubsidized Stafford loans will see their interest rates decrease from 6.8 to 5.41 percent. Essentially, that could save students hundreds of dollars over the life of their loans.

Additionally, the bill would place a cap on undergraduate loan interest rates at 8.25 percent, graduate loans at 9.5 percent and PLUS loans at 10.5 percent.

Hagan said one of the primary reasons she is supporting this bill is because of the provision that caps student loan rates, as "...students do have some certainty and they will not face interest rates that could skyrocket four or five years down the road. This was a major priority for me in getting a solution worked out," Hagan said.

Hagan also affirmed the nationwide concern that if students cannot pay off student loan debts, they cannot stimulate the economy in other ways, by perhaps buying a car or house or starting a financially stable family.

Republicans proposed having interest rates re-set each year, but the new bipartisan Senate bill would keep interest rates the same for the life of the loan.

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