House passes bill to keep low interest rates for student loans

By Amanda Fletcher
Daily Bruin Senior Staff

While the current economic slump has caused the UC Regents to
consider raising student fees, the federal government took an
important step in ensuring higher education remains affordable for
future students.

The U.S. House of Representatives passed a bill Thursday that
aims to keep interest rates low on federally granted student loans.
The bill, which was passed unanimously by the Senate in December,
extends the current formula for calculating interest rates on all
federal student loans to 2006.

Today the interest rate stands at 5.9 percent ““ the lowest
in history. But in 2006, the new bill will fix rates at 6.8 percent
until 2012.

It now awaits President Bush’s signature.

“It was very hard (to get the bill through),” said
Bob Cochran, press secretary for Representative Bill McKeon,
R”“Calif., one of the bill’s authors. “We got
unanimous support at the end of the day, but a lot occurred. (There
were) negotiations with student groups, the lending community and
higher education groups in general, like financial aid
administrators.”

According to Ellynne Bannon, CALPIRG’s national advocate
for higher education, who helped write the bill, a typical student
will save more than $600 over the life of their loan.

“This legislation is an important step in making college
more affordable for millions of Americans,” she said.

The bill amends the 1998 Higher Education Reauthorization
compromise, which set the current formula for interest rates on
student loans.

Though interest rates are at an all-time low, based on reports
from the White House’s Office of Management and Budget, rates
are expected to rise as the economy improves.

“Now it’s a fairly good time to be getting
loans,” said Merriah Fairchild, a CALPIRG advocate for higher
education in California. “It’s an unusual atmosphere to
have interest so low, and we know it won’t last.”

An interest rate of 6.8 percent would be a good deal in 2006,
Bannon said.

Having the fixed interest rate held off until 2006 will allow
students to take advantage of the current economic situation.

But if interest rates remain too low, lenders wouldn’t
make enough money to continue in the program, Cochran said.

“Lenders are in there to make money,” he said.
“There is limited profit, but they’re still there to
make money.”

“There was concern at the time that if you had lenders
dropping out of the program, then just the cream-of-the-crop kids
““ those at Stanford, UCLA and MIT ““ would get
loans,” Cochran said. “We wanted to keep them in there
to be able to serve all students.

“It will allow the underserved kids to continue to receive
student aid.”

According to the UCLA Financial Aid Office, 42 percent of all
students at UCLA received federal loans last year.

In a typical financial aid package, loans account for almost 24
percent of the money received. The average debt for UCLA students
after four years of school is more than $16,000.

“It’s not easy in the beginning, when you get
started in the job world, so you want to keep all costs
down,” said Suzanne Blessington, senior administrative
analyst for the UCLA Financial Aid Office. “Nobody likes to
pay interest.”