Skip to main content

The Senate passed legislation today to link the student loan interest rates to the financial markets, providing lower interest rates right away but higher ones if the economy improves as expected. The vote was 81-18.

This means that students taking out federal loans this year with have a 3.86 percent interest rate, slightly higher than the 3.4 percent rate a majority of Democrats voted to preserve, but that was defeated by a Republican filibuster. Under the deal negotiated with Republicans, that low rate can increase to rates as high as 8.25 percent for undergraduates, 9.5 percent for graduate students, and 10.5 on PLUS loans available to graduate students and parents as the economy improves.

An amendment was offered by Sens. Jack Reed (D-RI) and Elizabeth Warren (D-MA) to cap the rates at 6.8 percent for undergraduate Stafford loans, and 7.9 percent for graduate and PLUS loans. Progressive Democrats, joined by almost every other Democrat, lined up in support, but the amendment failed, 46-53. A second amendment offered by Sen. Bernie Sanders (I-VT) would have sunsetted the new interest rates after two years. It was defeated 34-65. That means these increasing rates will now be policy. Fixed student loan rates are a thing of the past.

So the student loan debt that is already larger than credit card debt, larger than auto loan debt, will increase even more now, with students getting drawn in with low teaser rates, and being stuck with higher and higher rates as they continue their education.

Originally posted to Joan McCarter on Wed Jul 24, 2013 at 03:32 PM PDT.

Also republished by Daily Kos.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Tip Jar (21+ / 0-)

    "The NSA’s capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything. [...] There would be no place to hide."--Frank Church

    by Joan McCarter on Wed Jul 24, 2013 at 03:32:52 PM PDT

  •  can you clarify for me... (0+ / 0-)

    The rates on a loan that student takes out this year... they can change in the future?  Of the rates for loans that will be taken out in the future will change?

    Based on what you wrote, it sounds like the former... and if that's the case, this is really terrible, since the borrowers will have no idea of their interest rate from one year to the next.  Kind of like the variable interest mortgages that helped tank the economy... brilliant!

    "The death penalty is never about the criminal. They've already done their worst. The question is always "will we join them"?" - jlynne

    by Hopeful Skeptic on Wed Jul 24, 2013 at 03:42:42 PM PDT

    •  apparently... (0+ / 0-)

      it is not as bad as I feared
      source

      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.

      "The death penalty is never about the criminal. They've already done their worst. The question is always "will we join them"?" - jlynne

      by Hopeful Skeptic on Wed Jul 24, 2013 at 03:59:31 PM PDT

      [ Parent ]

      •  Better if rates don't rise. And they will most (2+ / 0-)
        Recommended by:
        gmfp, Patango

        definitely since they are at historic lows.  This is simply a screw job brought to you by Obama and the Senate Dems.  They have made it worse for student loans than Bush did.  Can you imagine that?

        The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

        by accumbens on Wed Jul 24, 2013 at 04:39:25 PM PDT

        [ Parent ]

        •  Permanently low? (0+ / 0-)

          Do you really think that student loan rates should remain at 3.4 regardless of the rest of the economy?

          If we went back to 70s style inflation would it make sense to be able to borrow money for less than the rate of inflation?

          Personally, I'd tie to the Treasury rate +x (~+3.5%).  Then it'll float with the economy, but can't easily balloon.

          The Empire never ended.

          by thejeff on Wed Jul 24, 2013 at 04:48:25 PM PDT

          [ Parent ]

          •  What's the point of government student loans (6+ / 0-)

            if the rates aren't much better than market rates?  Why have them at all?  Historically, they have been cheap because the government subsidizes them.  What is happening is that the government is now making money off of them.  If you think that's ok, then fine.  

            The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

            by accumbens on Wed Jul 24, 2013 at 05:27:40 PM PDT

            [ Parent ]

  •  Re (6+ / 0-)
    So the student loan debt that is already larger than credit card debt, larger than auto loan debt, will increase even more now, with students getting drawn in with low teaser rates, and being stuck with higher and higher rates as they continue their education.
    Eh, it won't last long. The system will come crashing down sooner or later. It is unsustainable.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Wed Jul 24, 2013 at 03:49:58 PM PDT

  •  Senate fails... (3+ / 0-)

    and this makes it nearly certain that students can't make any prediction as to the cost of their education. The task is hard enough when rates are known. How can this be?

    Never mind, I have a pretty good idea how this can be.

    Roman Catholic by birth---thoroughly confused by life.

    by alasmoses on Wed Jul 24, 2013 at 03:50:13 PM PDT

  •  Evil, stupid, muthacluckers despise education. n/t (3+ / 0-)
    Recommended by:
    peptabysmal, gmfp, Patango
  •  Sick! (2+ / 0-)
    Recommended by:
    gmfp, midwesterner

    Who were the brown dog democrats (worse than blue dogs) that didn't side with the Read/Warren bill?

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Wed Jul 24, 2013 at 04:19:31 PM PDT

    •  Awkward...however (0+ / 0-)

      The whole point of the raise in rate is to discourage students from taking out large loans. Hopefully future students will realize that usually the can get the same degree for less

      The average two year public college costs $2,713 per year, the average in state university costs $7,605 per year (college board).

      Many in state universities also accept credits from community colleges allowing for an affordable 4 year degree with 2 years at both institutions.

      Most students can get some kind of part time job that can cover most other expenses as well.

      If you are $35,000 in debt and can not find a job you likely passed up on a much cheaper alternative because it was "not the right fit" or spent your money on a degree that was not in any way vocationally usable.

  •  Get an ARM for your Student Loans (0+ / 0-)

    Let's be honest, that's what this is.. it's an ARM type loan aimed at the student loan market.  And ARM based home mortgages always worked out so well.

    Gandhi's Seven Sins: Wealth without work; Pleasure without conscience; Knowledge without character; Commerce without morality; Science without humanity; Worship without sacrifice; Politics without principle

    by Chris Reeves on Wed Jul 24, 2013 at 04:21:23 PM PDT

    •  No, it's not an ARM. (0+ / 0-)

      Any one particular loan is held to one rate. It's just that each year the rate for a new loan will change based on the market.

      The real problem is that college lasts longer than one year, and students invariably need new loans in consecutive years.

      •  And rates are most assuredly going higher (0+ / 0-)

        Rates are at multigenerational lows now  - they can only go up unless the economy goes in the crapper again, which would put students in the shit house too.  what's worse is the government will be making money off the students.

        The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

        by accumbens on Wed Jul 24, 2013 at 04:42:51 PM PDT

        [ Parent ]

      •  It's an ARM and a LEG *nt* (0+ / 0-)

        Proud Aspie mom of an LGBT kid and some Aspies.

        by CatM on Wed Jul 24, 2013 at 05:28:36 PM PDT

        [ Parent ]

    •  From a comment above... (0+ / 0-)

      It is not an ARM.

      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.
      So, more like multiple fixed rate loans.  The problem is that if you are getting a degree over 4 years, you don't know year to year what your student loan rate will be.   So, a bad interest rate move could cause many people to drop out for at least a while, but once you stop it is harder to get going again.
      •  Ok. The articles I had found on this.. (1+ / 0-)
        Recommended by:
        zapus

        Seemed to indicate that it was moving forward with the yearly adjustment.

        http://www.bloomberg.com/...

        The Senate voted 81-18 today to replace fixed interest rates on federal loans with variable rates that will rise or fall annually according to the yield on 10-year Treasury notes.

        Gandhi's Seven Sins: Wealth without work; Pleasure without conscience; Knowledge without character; Commerce without morality; Science without humanity; Worship without sacrifice; Politics without principle

        by Chris Reeves on Wed Jul 24, 2013 at 04:34:07 PM PDT

        [ Parent ]

        •  Crap. (0+ / 0-)

          Fixing at the 10 year rate seemed like a good idea.  That is the cost of the money when the government loans it, and does not change for 10 years.  I know the loans take longer than 10 years to pay off, but at least there is a real connection to the actual cost of the money when it is loaned.

  •  Tell me again that the only way to have (4+ / 0-)
    Recommended by:
    Catkin, Shockwave, gmfp, Patango

    more jobs in the US is more training.

    Here is my idea. You go to school for x years at 0% interest, you pay that loan back by making a higher income,that means a lager tax load.

    That is more or less how the GI Bill worked out. We had more Engineers, etc., then money managers then now.Moving a bit now seems to be more important then fixing a bridge.

  •  George W. Bush also changed the loan terms (3+ / 0-)
    Recommended by:
    gmfp, susakinovember, Patango

    and they were not as bad as this for PLUS loans.  They used to be around 4-5% and float with caps around 8.5%.  He changed them to a fixed rate with the same cap, I think.  Now were talking a cap of 10.5%.  Good thing we got a Dem President and Dem majority in the Senate.  Would you have ever imagined 4-5 years ago that student loans would be worse under a Democratic administration?

    The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

    by accumbens on Wed Jul 24, 2013 at 04:37:25 PM PDT

    •  You DO know (0+ / 0-)

      that we have a GOP House , right? And they are more extreme than they have ever been and everything has to go through them? Ok then.

      Ed FitzGerald for governor Of Ohio. Women's lives depend on it. http://www.edfitzgeraldforohio.com/

      by anastasia p on Wed Jul 24, 2013 at 06:04:14 PM PDT

      [ Parent ]

      •  Yep, no reason to try and maybe educate people (0+ / 0-)

        about what is possible.  Dems are losers.  No stand, no guts and no glory.

        The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

        by accumbens on Wed Jul 24, 2013 at 06:35:40 PM PDT

        [ Parent ]

  •  Whom to shame and whom to praise (8+ / 0-)

    I went through the votes on the two amendments and the final deal here: http://www.dailykos.com/...

    If you want the quick rendition, here are the 17 Democrats to thank for opposing the bill despite White House pressure:
    Tammy Baldwin (D-WI)
    Richard Blumenthal (D-CT)
    Barbara Boxer (D-CA)
    Sherrod Brown (D-OH)
    Ben Cardin (D-MD)
    Kirsten Gillibrand (D-NY)
    Mazie Hirono (D-HI)
    Pat Leahy (D-VT)
    Ed Markey (D-MA)
    Bob Menendez (D-NJ)
    Chris Murphy (D-CT)
    Jack Reed (D-RI)
    Bernie Sanders (I-VT)
    Debbie Stabenow (D-MI)
    Tom Udall (D-NM)
    Elizabeth Warren (D-MA)
    Sheldon Whitehouse (D-RI)

  •  Couldn't have happened without the Damned Party. (1+ / 0-)
    Recommended by:
    Shockwave

    More and better demons at your service.

    When virtually all your choices turn out to be people who do stuff like this on a routine basis, it's a good sign that electoral politics and representative government have jumped the shark.

    Please proceed.

    SECURITY, because ticking time bomb mushroom cloud of terror!!
    Shop Kos Katalogue

    by Words In Action on Wed Jul 24, 2013 at 04:51:03 PM PDT

  •  While the first part of this quoted sentence is (1+ / 0-)
    Recommended by:
    zapus

    true, the second half is pretty disingenuous Joan.

    "So the student loan debt that is already larger than credit card debt, larger than auto loan debt, will increase even more now, with students getting drawn in with low teaser rates, and being stuck with higher and higher rates as they continue their education."

    Students will not be necessarily getting stuck with 'higher and higher rates as they continue their education'.  In case you have noticed, the Federal Reserve is in charge of setting the federal funds interest rate.  There is nothing natural about rates going higher or lower.  Fed policy determines rates, so if the rates go up its simply because the Fed board of governors decided to make it so.  This is the main part of what is called monetary policy, its the Fed's main tool.

    "The Earth is my country and Science my religion" Christiaan Huygens.................... Please join our Kos group "Money and Public Purpose". The gold standard ended on August 15, 1971, its time we start acting like it.

    by Auburn Parks on Wed Jul 24, 2013 at 04:54:01 PM PDT

  •  I hate "kick the can down the road one year" crap, (0+ / 0-)

    but if you want better bills, get rid of the Repugs in the House. That's what this deal was all about.Pass something that Repug idiots can try to pedal as deficit reduction, but get what you want for a year. Then next summer, say "If we don't do anything, rates will go to X%."

    It's sausage making at it's worst, but that's what this was.

  •  It's simple (5+ / 0-)
    Recommended by:
    Shockwave, susakinovember, gmfp, Patango, myeye

    Federal government policy with regards to education has nothing to do with education.

    The whole system is nothing other than a way to channel massive amounts of money from the poor and middle class to the banks.

    One reason education costs have continued to rise in the last several years, despite the horrendous state of the economy Bush created, is that student loans have been available to shift the cost of education into the future.

    Unfortunately, for many, the future has become now, and student have realized that even thought the economic value of the educations they sacrificed so much obtain are essentially zero, they are still saddled with the costs of those educations.  More, the costs are amortized as the loans go on, and there are specific provisions in the laws that forbid people from getting out from under those loans by declaring bankruptcy.

    Corporations can declare bankruptcy and use that to screw their workers and retirees.
    Cities can declare bankruptcy and use that to screw their workers and retirees.

    But the workers -- and retirees, eventually -- are not allowed to use bankruptcy to free themselves from a terrible financial deal that will screw them over for life, even to the extent that they will not be able to collect Social Security payments until the student loans are paid off.

    There are simple answers to all these problems.  And, as usual, no one is even talking about them.

    In Washington, whenever anyone does something wrong, everyone else gets punished.

    by Noziglia on Wed Jul 24, 2013 at 05:03:44 PM PDT

  •  the dems (1+ / 0-)
    Recommended by:
    Patango

    join their peeps the gop in screwing the 99%.

  •  And of course (0+ / 0-)

    it's the fault of Obama and the Senate DEMOCRATS (my Democratic senator voted AGAINST it) and not the Republicans who won't let ANYTHING pass unless it is totally watered down.

    No wonder we don't win . We are blind and sef-defeating.

    Ed FitzGerald for governor Of Ohio. Women's lives depend on it. http://www.edfitzgeraldforohio.com/

    by anastasia p on Wed Jul 24, 2013 at 06:00:26 PM PDT

  •  Thank you, Sherrod, for voting against it (0+ / 0-)

    Now let's make higher education free so we can compete in the world.

    Ed FitzGerald for governor Of Ohio. Women's lives depend on it. http://www.edfitzgeraldforohio.com/

    by anastasia p on Wed Jul 24, 2013 at 06:01:03 PM PDT

  •  it's a sad day for this country (0+ / 0-)

    i hope this can be remedied at some future time.

  •  This passed 81-18... (1+ / 0-)
    Recommended by:
    Patango

    and every amendment was defeated without filibuster.  That means that 3/4 of the Dems in the Senate voted for this bill, and there wasn't anywhere near unanimity from Dems on the amendments.

    Blame Dems for this.  The Senate GOP was pretty powerless to keep it from passing.  You can blame the House all you want, but what happened to "pass what is popular, and let the GOP take the blame for killing it in the House,"?  When it comes to economics, the line between the Congressional Dems and the GOP is paper thin.  Paper thin!

    Dems keep getting cover though, because they support amnesty for future Hispanic Dem voters, and they aren't particularly frightened of gays.  I wonder how many of them would be comfortable if their son turned out to be gay, or who know any Hispanics, other than the ones that mow their lawns?  More and better,...yeah, right.  The next Big Lie.
     

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site