CHARLESTON, W.Va. -- Last year, nearly 60,000 students at colleges and universities in West Virginia used federal subsidized Stafford loans to help pay for their education, according to the state Higher Education Policy Commission.
Starting Monday, any student who signs up for those loans in the future will now face interest rates of 6.8 percent, which is double the current rate. But that rate won't be in place for long if senators who are pushing for a fix, like Sen. Joe Manchin, D-W.Va., get their way.
Manchin and five other senators introduced a plan in D.C. on Thursday that aims to prevent those interest rates from doubling. Other groups of senators promoted on Thursday their own, dueling version of a solution as well.
If approved, Manchin's market-based plan, coined the Bipartisan Student Loan Certainty Act, would break away from the current system that allows Congress to set interest rates, and would impose a fixed-rate over the life of loans while keeping the cap on consolidated loans at 8.25 percent.
While officials say a compromise to keep student loan interest rates down will not be reached by Monday's deadline, it is possible that a deal could be reached after Congress returns from their weeklong July 4 break, which would allow them to retroactively fix the interest rate. Students start signing promissory notes for new loans as soon as late July.
Under Manchin's Act, all newly issued student loans would be set to the U.S. Treasury 10-year borrowing rate, plus additional percentages ranging from 1.85 to 4.4, depending on the type of loan borrowed.
"Our bill is the only bipartisan, permanent fix that lowers interest rates for all students, especially the poorest, while also putting in place a consolidation cap that ensures student loan interest rates never become unaffordable," Manchin said in a press release. "We've had a year to fix this problem and I refuse to kick the can down the road again."
The Congressional Budget Office said the legislation would reduce the deficit by $1 billion over 10 years, but opponents say that while the plan avoids an immediate rate hike, interest rates could skyrocket in the near future, depending on the financial market.
"In the beginning, there will be lower interest rates, but later on, every loan program will charge higher interest rates than we have seen in the past -- higher than the 6.8 percent," Sen. Tom Harkin, D-Iowa, said during a press conference in Washington, D.C., on Thursday. "This is the classic bait and switch. One or two years of lower rates, then they sock it to you."
West Virginia students borrowed $179 million in federal subsidized loans last year, according to the HEPC.
Tresa Weimer, director of the Financial Aid Office at West Virginia University, said the sad truth is that the state's students will continue to sign up for loans regardless of rate hikes.