Fox News reports that the deal struck Thursday to lower student loan rates back to their pre-July terms is already prompting criticism from some who called it a stopgap measure instead of a permanent solution:
A highly touted student loan “deal” began to run into criticism Thursday as advocacy groups and Democratic lawmakers complained it would merely provide short-term relief in exchange for higher borrowing costs on future students.
A few years from now, students with subsidized loans could easily be paying far higher rates than the average person paying off a car loan. In the near-term, the college agreement would rein in student loan rates, which for new subsidized Stafford loans had doubled from 3.4 percent to 6.8 percent at the beginning of the month.
Under the deal, undergraduates this fall could borrow at a 3.9 percent interest rate.
But higher rates would still loom. The rates would only last through the 2015 academic year, after which interest rates are expected to climb above where they were when students left campus in the spring. Rates for undergrads would be capped at 8.25 percent.
Sen. Jack Reed, D-R.I., was one of the first senators to criticize the plan, after the official roll-out of the proposal earlier Thursday.
“Instead of preventing the doubling of these rates to 6.8 percent, it would gradually raise these rates above 6.8 percent,” he said in a statement. “We might see one or two or three years of rates that are relatively below that number, but inevitably, mathematically those rates will go beyond 6.8 percent. And the caps are rather high.”
Liberal advocacy groups echoed the complaints.