President Clinton signed the Higher Education Amendments of 1998 into law Wednesday, lowering the interest rates banks may charge on guaranteed student loans by 30 basis points.
"The 30-basis-point yield reduction is going to be a painful one, but we feel that the private-based loan program will remain strong," said Bill Hansen, executive director of the Education Finance Council, a trade association for lenders in secondary markets.
However, the hit could have been worse. An 80-basis-point drop in rates took effect July 1, but the new law provides a 50-basis-point per loan subsidy that is expected to cost the government $2.7 billion over five years.
The Clinton administration opposed the subsidy, but relented in order to keep banks in the government's guaranteed student loan program.
"Every high school graduate in America, regardless of income, can afford to go to college," President Clinton said at the signing.