WASHINGTON (AP) -- President Barack Obama signed into law Friday a measure restoring lower interest rates for student loans, pledging the hard-fought compromise would be just the first step in a broader, concerted fight to rein in the costs of a college education.
Encircled by lawmakers from both parties in the Oval Office, Obama praised Democrats and Republicans alike for agreeing — finally — on what he called a sensible, reasonable approach to student loans even as he cautioned that "our job is not done."
"Feels good signing bills. I haven't done this in a while," Obama said, alluding to the difficulty he's faced getting Congress to approve his legislative priorities, such as gun control and budget deals.
"Hint, hint," he added to laughter.
Friday's ceremony capped a frenzy of negotiations that led to a rare bipartisan compromise to lower rates before classes resume. About 11 million students this year are expected to have lower interest rates, saving the average undergraduate $1,500 on interest charges on this year's loans.
The legislation links student loan interest rates to the financial markets. It offers lower rates this fall because the government can borrow money cheaply at this time. If the economy improves in the coming years as expected, it will become more costly for the government to borrow money, and that cost would be passed on to students.
House Speaker John Boehner, R-Ohio, called it "a good day" and a fine example of what Washington can accomplish when petty partisanship is put aside.
"With the stroke of a pen, we've now officially taken the politics out of student loans," Boehner said. "By linking interest rates to markets, this law — part of the Republican jobs plan — means students will see lower rates and won't have to worry about Washington suddenly making it harder to pay for their education."
Rates on new subsidized Stafford loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at the previous 3.4 percent rate. Without congressional and presidential action, rates would have stayed at 6.8 percent — a reality most lawmakers called unacceptable.
The compromise that came together is a good deal for all students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct for 10-year Treasury notes.
Undergraduates this fall will borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year's loan, but each year's loan could be more expensive than the last.
Interest rates will not top 8.25 percent for undergraduates. Graduate students will not pay rates higher than 9.5 percent, and parents' rates would top out at 10.5 percent. Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.
Even as they passed the bill, officials were already talking about a broader approach to curbing fast-climbing costs and perhaps scrap the deal when they take up a rewrite of the Higher Education Act this fall. As a condition of his support, Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, won a Government Accountability Office report on the costs of colleges. That document was expected to come in December.
But for now, interest payments for tuition, housing and books would be less expensive.
In all, some 18 million loans will be covered by the legislation, totaling about $106 billion this fall.
The Congressional Budget Office estimated the bill would reduce the deficit by $715 million over the next decade. During that same time, federal loans would be a $1.4 trillion program.