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Interest rate cut to save students money on federal loans
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By KATIE HOWELL Staff Writer
Three months from now students taking out federal loans could be paying lower interest rates.
However, as good as this news may be, it could have been .6 percent better.
A proposed national student loan interest rate cut of 1.4 percent, planned to take effect July 1, was whittled down to approximately .8 percent after lending companies said they couldn't back the original figure.
The .8 percent reduction is now pending a congressional vote slated for later this month. It would save students $800 per $1000 loan a year.
In 1993, Congress passed The Student Loan Reform Act, including the 1.4 percent cut, which would have saved students about $10 million over the next 10 years.
However, after the lending companies said they couldn't accommodate such a cut, a congressional subcommittee arrived at the .8 percent compromise.
A Department of the Treasury investigation found that while the lending companies didn't have the resources for the 1.4 percent cut, they could handle a cut of .8 percent if the government would subsidize about .3 percent for the lending companies.
"It isn't as good as we had hoped for, but it is a good compromise," said Kevin Boyer, executive director of the National Association of Graduate-Professional Students, Inc. "We backed it because it was the best we can get."
The rate cut will not be as high as promised, but it is still a welcome relief for students who will pay loans in the future.
"It think it's good since I'll have to pay back my loans in two years," said Adam Causey, a sophomore from Snellville.
"Anything where I won't have to pay as much is good," he said.
Some University experts also support the measure.
"We're pleased in that whatever goes through will save students money and payments," said Susan Little, associate director in charge of operations of financial aid.
"We're just not sure how it's going to wash out," she said.
According to Boyer, President Clinton doesn't support government-subsidized loans, but the president supports an interest rate cut on student loans.
