Senate Passes Student Loan Plan

Photo Credit: APA plan to restore lower interest rates on most college loans won Senate approval Wednesday, despite objections from a bloc of Democrats who warned it could ultimately increase the cost of a degree for many students.

The legislation, which is supported by President Obama and is expected to swiftly pass the House, would reinstate a market-based approach for calculating rates, tying them to the 10-year Treasury note. The new rate for undergraduate Stafford loans would be about 3.8% this year, slightly above the rate that expired July 1.

The final vote was 81-18. Sixteen Democrats, joined by Sens. Mike Lee (R-Utah) and Bernie Sanders (I-Vt.), voted no.

A market-based system had been in place until 2006, when the rate was fixed at 6.8%. It was later gradually reduced to 3.4%.

Democrats successfully mounted an election-year campaign in 2012 to extend that lower rate for an additional year. As rates were set to return to 6.8% this year, congressional Democrats pushed for another temporary extension. But they found their position weakened by a White House budget plan that supported a return to a market-based plan.

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