By Marc Larocque

The U.S. House of Representatives initiated a plan last Wednesday to halve the interest rate on government subsidized Stafford student loans from 6.8 percent to 3.4 percent over the next five years.

By an overwhelmingly bi-partisan vote of 356 to 71, the H.R. 5: College Student Relief Act of 2007 was passed. It still needs to be approved by the Senate and obtain the president’s signature before it becomes law.

President George W. Bush opposes the bill, and The White House Office of Management and Budget released a statement the day before the vote warning that the bill would encourage more student borrowing.

“Instead, the administration would support efforts to direct savings to additional grant support for low-income students,” according to the statement said. “Furthermore, encouraging more student debt can also fuel today’s upward tuition spiral.”

The bill’s five-year cost of $5.9 billion would be covered by cutting subsidies given to lenders who offer guaranteed federal student loans, and by raising the fees institutions pay on every student loan they have. Democrats touted the fact that the bill would help students without adding to the budget deficit.

This comes after $12 billion of student savings were squeezed from federal student aid programs last year as part of the former Republican Congress’ Higher Education Reconciliation Act, according to an article from Inside Higher Education.

Republican leaders supported an alternative bill that would have cut interest rates for graduates earning annual salaries of $65,000 or less or those serving in the armed forces.

Democratic leaders in the Senate are mostly supportive of the House approach, though they want it to be part of a broader version of the federal approach to student loans and grants.

Senator Edward M. Kennedy, D-Mass., says he wants interest-rate cuts tied to other changes: a boost in Pell grants, a forgiveness program for public servants with loan debts lasting 10 years and an overall cap of 15 percent of a borrower’s discretionary annual income on federal student loan payments. Kennedy acclaimed the House vote and vowed to expand on the bill with his own legislation in the Senate.

With the rising costs of college, most prospective students are not looking at the interest rates of loans when they are trying to plan to college, said Joseph Warren, special assistant to the director of Northeastern’s government relations and community affairs. Warren does outreach work for Northeastern, trying to get low-income and first generation students into college.

“This will help Northeastern students after they graduate and when they are trying to get a car or pay their bills,” Warren said. “I’d like to see more Congress support for actually getting students into college, but I am really pleased with NU’s outreach program, despite their lack of funding.”

H.R. 5 will save Northeastern students an average of $35 a month in interest payments, said Seamus Harreys, dean of financial services at Northeastern.

The average four-year college student starting school in 2007 with subsidized Stafford loans would save about $2,280 over the life of his or her loans under the proposed legislation.

Last year the average borrower graduated with $13,994 in loan debt. This debt caused 14 percent of graduates to delay marriage, 30 percent to hold off on buying a car and 21 percent to postpone having children, according to a report released by the research arm of Campaign for America’s Future.