Congress rejects proposed bill to change interest rates on student loans

Proposed changes to the Higher Education Act -- which would, among other changes, affect the interest rates of students who consolidate loans after graduation -- will not be passed this year, according to The Chronicle of Higher Education.

Before the announcement came, Penn's Director of financial aid William Schilling explained that, were it passed, the bill would have little overall effect on the University's ability to provide financial aid to its students.

The renewal of the Higher Education Act is actually a combination of several different bills. The specific bill that would have affected the changes in financial aid is known as the "College Access and Opportunity Act."

"This is not a bill I think that makes radical changes in the Higher Education Act," Schilling said. "It tinkers around the edges, but there isn't a lot that is a major change."

Along with changes to the maximum allowed amount given in a federally subsidized Stafford Loan, the bill would have altered the way that interest is calculated after students graduate.

Currently, students can consolidate their loans into a fixed-interest rate to keep down the cost of their loans over time.

"The Stafford Loan rate is a variable rate. It's changed every year as of July 1, and it's tied to the rate on treasury bills," Schilling said. "However, currently, students can consolidate at a fixed rate based on the current variable rate of the Stafford loans."

"Because interest rates have been so low over the last several years, lots of students have opted to lock into that long-term, low fixed rate," he added.

Under the proposed changes, "the consolidation rate would no longer be fixed -- it would continue to be a variable rate," Schilling said.

Overall, Schilling said the bill would not have had much impact on Penn had it been passed this year. He estimated that the act's renewal could eventually have had a $1 million impact on Penn's overall $70 million federal aid program.

"Right now, schools are guaranteed to get what they've been getting in a particular base year, and if funds appropriated exceeded the funds guaranteed, those funds are reallocated according to a formula," Schilling said. Under the proposed changes, "Penn and some other primarily private institutions ... could get a reduced amount of money from those campus-based programs."

Many -- including Schilling -- had long been doubtful that the bill would pass.

Political Science Professor Jerome Maddox explained some of the factors at play in Congress.

"Given polarization in Congress right now, it's pretty difficult to move much through the committee system," Maddox said. "Right now, a lot of appropriations are being stalled.

"Lots of bills -- good or bad -- are being held up," Maddox added.

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