Millions of students will find temporary financial relief now that President Barack Obama has signed House Resolution 1911, a new plan for student loan interest rates, into law.
As a result of the retroactive bill’s passage, all undergraduate federal loans taken out on or after July 1 will have an interest rate of 3.9 percent. Prior to Aug. 9, the day Obama signed the bill, the interest rate was 6.8 percent for undergraduate subsidized and unsubsidized loans as Congress missed the July deadline to prevent rates from doubling.
Under HR 1911, interest rates for graduate loans and PLUS loans are now at 5.4 and 6.4 percent, respectively.
Cal State Long Beach Vice President of Administration and Finance Mary Stephens said that HR 1911 is more of a “compromise.”
“I think the passage of this law is positive in that it protects student loan borrowers from an immediate steep increase in the interest [rates],” Stephens said. “The law is a compromise that allows the interest rate … to rise or fall in the future.”
Because HR 1911 links interest rates to the 10-year Treasury note, rates will fluctuate with the national economy, according to the bill’s text. The Congressional Budget Office has predicted that rates will rise as the economy continues to improve in coming years.
However, the rate locks in for each loan’s lifetime and the plan limits how high these rates can rise. The interest rate for undergraduate loans is capped at 8.25 percent, while those for graduate loans are capped at 9.5 percent and 10.5 percent for PLUS loans, according to the bill’s text.
For some students, like junior information systems major Darius Taylor, HR 1911 isn’t in the best interests of college students.
“I don’t like it,” Taylor said. “It’s better to have a consistent loan rate. It’s the safer route.”
Others, though, were more optimistic about the bill.
“I think it’s a good plan,” junior history major Jamie Rebong said. “Yeah, our loan rates might be higher, but it’ll be a better economy, which will be good when I graduate.”
Assistant City Editor Andrew Spencer contributed to this report.