Update: Congress passes Bipartisan Student Loan Certainty Act of 2013

In a fairly novel turnaround Congress passed a major piece of legislation Wednesday with significant bipartisan support that changes the way interest rates for student loans will be calculated. The Bipartisan Student Loan Certainty Act of 2013 was able to bridge a gap between Democrats and Republicans over the government’s role in regulating financial institutions. The bill passed by an overwhelming majority of 392 to 31.

The fate of the bill has long been in question as both Democrats and Republicans alike tried to find reasons for opposing it, ranging from concerns about protecting students from predatory loan practices among the former to worries about government interference in distorting interest rates.

All federally subsidized Stafford loans will have interest rates that are tied to 10-Year Treasury bonds plus 1.8 percent with a cap of 8.5 percent and 9.5 percent on undergraduate and graduate loan respectively. The federal loan program PLUS would pay the Treasury rate plus 4.5 percent. Roughly, this means individuals taking out new loans after the law passes will pay 3.61 percent for undergraduate loans and 5.21 percent for graduate loans.

Fed Chair calls out Congress for fiscal policy frustrating recovery

FED Chair Ben Bernanke is widely believed to be stepping down at the end of his second term in January. Today he appeared before Congress to give his last biannual update on the economy to the House Financial Services Committee, reaffirming the Fed’s monetary policies but warning that federal fiscal policy remains the single largest obstacle to revitalized growth.

He noted that federal spending cuts of the kind supported by the GOP are reducing growth this year by about 1.5 percentage points.

“The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery.”

Read his remarks to Congress here.