Entries in Interest Rate (3)


Congress Passes Transportation Extension with Student Loan Fix

iStockPhoto/Thinkstock(WASHINGTON) -- After months of wrangling, arm-twisting, bitter debate and closed-door negotiations, Congress finally has a bipartisan deal for the American people. Just in time.

The agreement, which couples a student loan interest rate extension with a long-awaited boost for infrastructure, passed the House first, 373-52. A short time later, the Senate approved the deal 74-19, with one senator voting ‘present.’

For months, progress stalled as Republicans debated internally over a long-term highway bill and Congress searched for an agreeable method to prevent new subsidized Stafford loan rates from doubling from 3.4 to 6.8 percent on July 1. The deal extends current rates for another year for approximately 7.6 million students signing up for new loan agreements.

House Democratic Whip Steny Hoyer, D-Md., blamed Republicans for taking Congress “to the brink,” but he said the bipartisan deal gives “certainty to millions of students and that will pave the way for jobs and economic growth.”

“Keeping these rates low recognizes the challenges our graduates face in today’s tough job market,” he stated. “Let us continue in the spirit of bipartisanship that enabled us to pass this bill and work together to meet the challenges we face as a nation.”

After months of disagreeing over how to pay for the $6 billion bill, legislators finally came together late this week over how the bill would be financed. About $5 billion of the cost will be offset by “smoothing,” a tactic that creates a “stabilization range” for employers to compute their pension liabilities and around $500 million collected by increasing Pension Benefit Guaranty Corporation fees.

Currently there are no limits in place for how many years a student could receive a Stafford loan subsidy, but $1.2 billion of the cost of the extension would be recovered by limiting access to the loan to six years for a 4-year degree.

“Republicans and Democrats worked hard to find common ground,” Senate Minority Leader Mitch McConnell, R-Ky., said Friday morning. “The agreement we’ve reached will ensure that college students who are already facing enormous challenges in the Obama economy won’t be paying higher interest rates next month.”

Tucked into the deal are two other critical pieces of legislation set to run out of money soon: the highway bill that has plagued both chambers and an extension of the National Flood Insurance Program, which was due to expire at the end of July.

As the hurricane season looms, the agreement extends funding for flood insurance until September of 2017.

For months, the House was unable to pass its version of the highway bill, instead opting eventually for a short-term extension to give negotiators another 90 days to work out a deal. But that temporary patch was set to expire Saturday, threatening federal highway and transit aid programs and the government’s authority to levy federal fuel taxes expire, and putting about 4,000 jobs at the Department of Transportation at risk.

The agreement funds federal highway, transit and highway safety programs at current levels through the end of FY 2014. It does not include earmarks or increase spending and is fully offset with many reforms included in the Senate-passed highway bill.

“We speed up project delivery, cut red tape, and do it without jeopardizing environmental laws,” Sen. Barbara Boxer, who led the negotiations from the Senate-side, said. “For the first time, we send half of the funds for bike paths and pedestrian walkways directly to local entities, and we protect those funds while giving states more flexibility on their share.”

The Keystone XL Pipeline was left out of the final deal, breaking off 52 hard-line House Republicans from supporting the deal. As a result House Democrats helped carry the vote, with none opposing.

Republicans are already promising another run at Democrats for opposing the pipeline, which they contend would create tens of thousands of jobs.

Copyright 2012 ABC News Radio


Credit Card Interest Rates Gone Wild

Photo Courtesy - Getty Images(NEW YORK) -- Consumers may be feeling more confident to spend, and credit card companies are taking notice. First Premier Bancard in South Dakota got plenty of takers for a credit card with a 79.99-percent interest rate, aimed at people with poor credit.

Although the credit card had a sky-high interest rate, the company said 700,000 people signed up, according to the Credit Union Times. The average interest rate for a credit card plan was 13.78 percent in 2010, according to data released by the Federal Reserve this week.

"Consumers had been paying down their credit cards or consolidating their debt. But they appear to be feeling more confident and charging once again," said Jeff Kleintop, Chief Market Strategist for LPL Financial.

The Federal Reserve reported that U.S. consumer borrowing rose in December for the third consecutive month. Credit card usage increased in December for the first time since August 2008.

"In general, there isn't much credit available to high-risk borrowers and what is available is expensive for obvious reasons," said Kleintop. Banks charge higher rates for high-risk customers who may not be able to pay back their debt.

The bank has since decreased the APR to 59.9 percent. Chi Chi Wu, staff attorney with the National Consumer Law Center, said the 79 percent and 59 percent APRs are the highest rates she can recall seeing.

And while the credit card's interest rate decreased, the number of fees it has did not, according to Wu, an expert on subprime credit cards. Wu said First Premier Bancard is "notorious" for being a "fee-harvester" credit card company, in which high fees eat up most of an already low credit limit, leaving a customer with little useable credit.

Wu said there have been cases of enforcement actions against some high-interest fee-harvester companies since the late 90s. Then President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, of 2009. That law regulated how credit card companies marketed their products, including a 25-percent cap on credit card fees.

But interest rates like 59.9 percent are allowed under the CARD Act, as long as it's not done retroactively. Wu said as long as they have a 25-percent cap on credit card fees, the high-interest rate cards are "perfectly legal."

Consider, however, that carrying a $1,000 balance on a card with a 59-percent APR and making the minimum payment of two percent means it will take 50 years to pay off the balance. Oh, and the interest charges along the way will be a cool $86,500,932,454. But if you pay three percent of the balance, that would knock the interest down to $231,468,110.

Copyright 2011 ABC News Radio 


China Raises Interest Rate; How Will it Affect Global Economy?

Photo Courtesy - ChinaFotoPress/Getty Images(BEIJING) -- China is raising interest rates by a quarter percent and the decision has caused stock losses across global markets.

“China is trying to cool things down a little bit. Step on the brakes,” said Bloomberg’s Sarah Eisen. “It’s a red hot economy, it’s trying to stop it from overheating.”

The nation last raised interest rates in 2007.

“It’s a sign that China’s economy is really on fire,” Eisen told ABC News. “It just highlights the difference between what’s going on over there and what’s going on over here in the United States, where you have the federal reserve -- our central bank -- talking about easing further, moving in the opposite policy direction, adding more stimulus into the system to try to stimulate, jump start the economy.”

China’s move is an effort to tighten its economy.

“Traders were spooked about this interest rate hike,” she said. “They were worried that maybe if China starts tightening it will slow down that strong impressive growth that we’ve been used to seeing. So that was causing some tensions. That could really have ripple effects,” Eisen said, adding that she doesn’t expect the hike to have significant long-term effects on the global economy.

Copyright 2010 ABC News Radio

ABC News Radio