After much consternation and debate, and just days before the deadline, federal lawmakers have struck a tentative agreement to extend the current interest rates on subsidized government student loans for the next year.
Federal student loan interest rates were set to double to 6.8 percent on July 1, but federal lawmakers struck an agreement to get the current APRs pushed back to the same date next year, according to a report from the Washington Post. It had been feared that the deal wouldn’t be reached prior to the deadline, but observers agreed that it seemed something would be done given the mutual desire from both Democrats and Republicans to get the current rates extended.
[Credit Score Tool: Get your free credit score and report card from Credit.com]
The sticking point for the two parties was, not surprisingly, how the government would pay for the rate extension, the report said. The deal will cost roughly $6 billion, but will likely help to save money for roughly 7 million students nationwide. In the end, it was agreed that the extension would be paid for by boosting the premiums businesses pay for federal pension insurance, a deal originally proposed by Senate Majority Leader Harry Reid, a Nevada Democrat.
The compromise will also come because the new deal will also include a provision that part-time students will face limits on the number of years in which they will be able to receive subsidized loans, which was originally suggested by Republican lawmakers, the report said. However, it remains unclear whether the deal will be in any way linked with a two-year extension to the current highway funding budget, which is also set to expire on July 1. It’s believed that joining the two bills would allow lawmakers to sign off on both more quickly, but Reid notes that the latter still requires more attention before it is in any way finalized.
[Student Loans: Research and compare options for student loans at Credit.com]
It’s estimated that the doubled interest rates, which would have only been applied to loans obtained by students after July 1, would have cost those who got them an additional $1,000 over the life of the loan. Currently, the average college student is graduating with more than $45,000 in education loan debts, as well as a few thousand more on their credit cards, and many have more than one such account.