The White House says the average Missouri student borrower will save just over $1,500 this school year under bipartisan legislation approved last week in the Senate, which would undo a rate hike that took effect for subsidized Stafford loans on July 1.
Republican Senator Roy Blunt, a co-sponsor of the legislation, told students in Springfield Friday that the deal allows undergraduates this fall to borrow at a 3.86 percent interest rate. The bill stipulates that students will pay the current yield on the 10-year Treasury note plus 2.05 percent. Blunt says that means the interest rates will be that of what the federal government could borrow on that particular day for 10 years, even though students may take 25 years to pay their loan back.
“But students will know and their families will know how much that part of their loan will always have as interest," Blunt said. "So the interest rate is permanent, until that part of the loan is paid off."
Since the plan links rates to financial markets, it’ll cost more to borrow in the future if the economy improves, a concern among the bill’s opponents.
President Obama has urged the House to pass the Senate’s plan.