Congress passes bill to keep student loan interest rates from doubling

Obama had blamed congressional inaction over expiration of lower student loan rates set to go into effect on July 1
obama student loans
Surrounded by students last week, Obama had called on congressional leaders to pass legislation that would keep students loans lower. Photograph: Jewel Samad/AFP/Getty Images

US students were handed an eleventh hour reprieve from higher loan rates on Friday as Congress passed a bill nixing the scheduled hike.

The doubling of interest payable on college loans was due to come into force on Sunday, with President Barack Obama blaming inaction in Washington for threatening an increase that would have put the squeeze on some 7.4 million young Americans.

But as the clock ran down on lawmakers to reach a deal, both sides in Congress back away from demands that looked set to scupper the bill being passed.

Republicans dropped a requirement that pegged student loans to the approval of the contentious Keystone XL pipeline. Likewise Democrats gave way on environmental protection measures they had wanted tethered to bill.

As such, a new legislative wrap was proposed, taking in the anchoring of low student loan rates alongside a commitment to spend more than $100bn on transport programmes and provisions that extend the existing help for flood risk homebuyers.

It cleared the House in a 373-52 vote. The Senate later approved the bill by a 74-19 margin. It will now go to the White House to be signed off by the president.

The package will prevent federal loan interest rates for students doubling to 6.8% on Sunday in a one-year, $6bn deal.

Alongside shielding millions of students from further belt-tightening, the measures are expected to protect some 2.8m jobs in regard to transportation programmes. They will also ensure that the homebuyers needing government underwriting for mortgages in flood-risk areas will continue to be protected for at least five years.

The passing of the legislative bundle follows months of protracted negotiations that had looked at times to be heading nowhere. The stalled talks had become an increasing source of irritation to the White House.

Last week, the president slammed obstructionists in Congress over the issue of student loans. "There's no excuse for inaction," Obama told them, adding that without a deal, millions of students would see rates doubled "because Congress hasn't acted to stop it".

Speaking shortly before Friday's vote, John Mica, the Republican House transportation committee chairman, acknowledged that negotiations hadn't been easy. "It has indeed been a very bumpy road to get to this point," he told the floor of the House, adding: "I'm not particularly pleased with some of the twists and turns."

Nonetheless, both sides agreed to dropping controversial additions to the legislative package, ended the gridlock and allowing a revised bill to pass.

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