The House gave final approval Wednesday night on legislation that allows college students to avoid higher interest rates on federal loans, ending a weeks-long standoff with the Senate.
The bill, which the Senate approved last week, links interest rates to 10-year Treasury notes, meaning they pay lower rates now but higher rates in subsequent years if the economy improves.
The House passed the measure by vote of 392-31. President Obama is expected the sign the bill into law after calling it a “major victory for our nation’s students.”
The measure would let all undergraduates borrow money at a 3.9 percent interest rate, while graduate students would pay 5.4 percent. Those rates would climb as the economy improves and it becomes more expensive for the government to borrow money.
But rates for undergraduates would be capped at 8.25 percent, while the rate for graduate students would not climb higher than 9.5 percent. According to Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.
The bill’s supporters say the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate $1,500 in interest charges on loans they take out this year.
“Today, we’ve taken an important step to help make life work for students and families trying to afford the cost of college,” said House Speaker John Boehner, R-Ohio. “Going forward, the whims of Washington politicians won’t dictate student loan interest rates, meaning more certainty and more opportunities for students to take advantage of lower rates.
In May the House passed a similar version, but it stalled in the Senate when Majority Leader Harry Reid, D-Nev., and other Democrats opposed the plan, preferring to continue the current system of locking in rates.
After Congress failed to agree on a plan to keep the rates from rising, the interest rate on new federally subsidized Stafford loans jumped to 6.8 percent on July 1 from 3.4 percent. The increase meant an extra $2,600, on average, for students.
But after a deal was struck on caps limiting how high rates could climb, the plan easily cleared the Senate.