Deal Reached on Student Loan Interest Rates

July 5, 2012

On Friday, June 29, House and Senate negotiators reached an agreement that would maintain subsidized undergraduate Stafford Loan interest rates at 3.4% through June 2013. Without an agreement, rates were expected to double to 6.8% for new loans originated after July 1, 2012. The student loan deal was part of H.R. 4348, the Surface Transportation Extension Act of 2012, a massive package that also combined the federal highway and flood insurance programs as well. The Senate passed by a vote of 74 to 19 and the House members voted 373 to 52 in favor of the bill. The legislation is expected to be signed into law by the President.

Although this bipartisan agreement will prevent 7.4 million college students from being burdened with an additional average of $1,000 of debt, it continues a trend of making cuts to one student aid program to pay for another. The funding used to keep the rates low was partially paid for by limiting the time a student can be eligible for subsidized loans to 150% of "the program length" or 6 years of undergraduate study. If a student needs a seventh year of study to complete a degree, he or she would have to borrow using an unsubsidized loan. An additional $5 billion in funding to keep the interest rate low was raised by "smoothing," a tactic that creates a "stabilization range" for employers to compute their pension liabilities and approximately $500 million was collected by increasing Pension Benefit Guaranty Corporation fees.

Thank you to ASHA members who took action on this important issue. For additional information, please contact Neil Snyder, ASHA's director of federal advocacy, at or 800-296-5700, ext. 5614.

ASHA Corporate Partners