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Stafford Loan Rate Reduction on Tap Next Year?

NEW YORK (MainStreet) — In September, Congress began the process of reauthorizing the Higher Education Act, first passed in 1965 and last re-authorized in 2008. The Higher Education Act is the law that determines how federal dollars are awarded to post-secondary institutions, colleges and their students. The Act covers everything from loan limits to accreditation. Thirteen separate fact-finding hearings are likely to be held before the process is complete. A wrap up by the spring is anticipated.

In 2008, Congress tried to use to Act to make states answer for tuition spikes and limit abuses in the student loan system. Yet it failed to make college more affordable, and many - both inside Congress and outside the Beltway - have begun to question the value of post-secondary education.

During the last five years, some observers say that the U.S. Department of Education has formulated policies that circumvent the Act, and it remains to be seen how Congress will address this. The Chronicle of Higher Education reported on September 13 that the Department of Education "has stepped in with new policies outside of the Higher Education Act," including initiatives such as defining the credit hour. Congress has also altered the way student-loan interest rates are set.

Yet the Act will continue to wield considerable power—including the potential to lower the rates on federal loans made by the Department of Education. A staff member of a senator on the Senate Health, Education, Labor and Pension (HELP) committee didn't rule out the possibility that it could move to drop the rates of Stafford loans that were raised last summer.

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