WASHINGTON — With less than a week remaining until the interest rate on federally subsidized student loans is set to double, Senate leaders said Tuesday afternoon that they had agreed on a compromise to keep the rate at 3.4 percent for another year.
The $6 billion extension would be paid for in part by changing eligibility rules for subsidized loans, which are awarded based on financial need and on which the government pays the interest while borrowers are enrolled in college. Once students had been pursuing a bachelor's degree for more than six years, or an associate degree for more than three, they would no longer be eligible to take out additional subsidized loans — a change that would save about $1.2 billion. The remainder of the cost would reportedly be covered by changes to pension laws, and the student loan measure might be combined with a federal transportation bill that also has a July 1 deadline for renewal.
The proposed change to eligibility rules might disappoint some student aid advocates. Senate Democrats had hoped to pay for the interest rate extension without any financial damage to other financial aid programs. The limitation — that subsidized loan eligibility be limited to 150 percent of a program’s time to degree — was originally proposed by President Obama in his budget request for fiscal year 2013, and adopted by Senate Democrats in an appropriations bill voted on in committee last week.
Click through for the full article