Federal lawmakers approved a temporary drop in student loan interest rates on Friday.
The measure, which was added onto a transportation bill, would drop interest rates to 7.4 percent from 8.2 percent and compensate banks for three months starting July 1. By that time Congress should implement a permanent compensation program.
The Transportation Equity Act for the 21st Century, pending President Clinton’s signature, will fund transit projects for six years. The bill passed through Congress on Friday.
The student loan amendment is not tied with the rest of the transit bill. Lawmakers used it to rush passage of the student loan provision.
“That’s the way they do things when there’s an emergency,” said Phil Lewenstein, director of communications for the Minnesota Higher Education Services Office.
With student loan interest rates scheduled to drop to 6.9 percent on July 1, banks threatened to cut back student loans without compensation.
On May 6, the House passed the Higher Education Act, which dictates interest rates and federal financial aid policies for the next five years. But the legislation is stalled in the Senate. It won’t likely become law before the summer deadline.
As a direct loan institution, University students don’t deal with banks — they receive their loans straight from the government. But students still benefit from lower interest rates.
“Anything that reduces the cost of higher education is good for students,” said Peter Zetterberg, director of the Office of Planning and Analysis.
— Coralie Carlson