The U.S. Congress today approved a measure that will freeze federally subsidized student loan rates for 570,000 students in California and millions across the country, days before the 3.4 percent rate was set to double.
The deal was tucked into a larger transportation measure on funding roads and bridge construction that was approved by the House Friday on a 373 to 52 vote and in the Senate on a 74 to 19 vote. The bill now heads to President Barack Obama for his signature or veto before midnight Saturday.
Loans rates were set to rise to 6.8 percent Sunday. But with the bill's expected passage, rates will remain at 3.4 percent for another year, saving about 7.4 million students nationwide an average of $1,000 each, according to the White House. Lawmakers said this would amount to many thousands of dollars in savings over the life of the loans.
The bill also imposes a new limit to borrowing on the federally-subsidized Stafford loans — six-years or $23,000, whichever comes first — for new undergraduate borrowers, said California State University spokesman Mike Uhlenkamp.
In California, education officials have advocated and lobbied hard for the bill's passage.
University of California President Mark G. Yudof was an early supporter of the proposal and sent personalized letters urging all 55 members of the California congressional delegation to approve it.
More than 76,300 undergraduates at UC receive the federally-subsidized Stafford loans, said UC spokeswoman Dianne Klein. The loans totaled more than $320 million in 2010-11 and average more than $4,000 per student, Klein said. She said UC students will pay back their loans at the rate that was in place when they signed for them.
At the California State University system about 126,000 undergraduates or 34 percent of the system's 420,000 students have such federally-subsidized loans, Uhlenkamp said.
"It's beneficial for our students," Uhlenkamp said. "Part of the stats we've always trumpeted at CSU is that our undergraduates have low debt rates, so this is part and parcel of that...So the ones that do have debt would potentially be able to pay them off in a more reasonable fashion."
The College Cost Reduction Act passed in 2007 had phased the loan interest rates down each year from 6.8 percent to 3.4 percent, but was set to expire July 1 and return to 6.8 percent. The one-year freeze will cost the government about $6 billion, which will be paid for by two changes to federal pension insurance funding.
California Democratic Sen. Barbara Boxer voted in favor of the bill and praised its bipartisan support and passage.
"Too many students and their families are struggling with the rising costs of college, and this legislation will help keep college affordable for all our families," Boxer said in a statement.