BOSTON (CBS) — So they cut a deal in the U.S. Senate.
God bless America.
It’s not law yet, but Senators have approved a compromise on student loan interest rates just weeks after they were allowed to double.
We talked about this when rates on subsidized loans jumped to 6.8% when lawmakers failed to reach a deal.
Now that there’s an agreement, many Senators and White House officials are taking a victory lap. But you could argue there’s even more reason to be outraged now.
That’s because this agreement sets the stage for even higher interest rates down the road.
Leave it to Washington to kick the can. Again.
To be sure rates will be lower under this deal. But only temporarily.
Future loan rates will be tied to the financial markets. Just like mortgage rates. And while Congress has put a cap on them, it’s more than twice as high as the initial rates negotiated under this deal.
That’s why a few Senators, including Elizabeth Warren (D-MA), voted “no.”
The timing here is very important.
College students are graduating with an average of $26,000 in loan debt. That’s more than ever. And interest rates are now beginning to rise after holding near record lows for years.
These two trends will eventually collide. And it won’t be pretty.
That means congress will likely have to come back and fix the deal that it is now bragging about.
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