Breaking Finance News

Much Needed Aid for College Students Hits another Roadblock

According to CNNMoney, what was looking like a deal to curb the doubling of some student loan interest rates has hit a snag–again.

The deal being discussed by Senate lawmakers was supposed tie student loan interest rates to the 10 year treasury yield, according to sources with knowledge of the negotiations.

But according to estimates from the Congressional Budget Office, the legislation would cost the country about $22 billion over the next 10 years. Both sides believe that the package has to be revenue neutral making the estimate, released Thursday night, a potential “back to square one” event.

At issue is the recent doubling of government-sponsored subsidized student loan rates that doubled from 3.4 percent to 6.8 percent–matching the rate of the unsubsidized loans.

The deal would affect both subsidized and unsubsidized loans. Students would pay an interest rate of 1.8 percent plus the yield on the 10 year treasury note. At today’s rates, that would be about 4.35 percent. Graduates would pay 3.4 percent over the 10 year yield making their rate 5.95 percent at today’s rates.

Democrats argue that the government shouldn’t make money off of students who are already collectively holding more than $1 trillion in outstanding student loans.

A previous Senate bill placed the rate higher but placed an 8.25 percent cap on the rate for undergraduates and 9.25 percent for graduate students.

The issue has become a hot political topic as studies emerged showing that students owed an average of $27,000 in loans upon graduation.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.