The House and Senate passed a highway bill Friday that contains provisions to prevent a doubling of the interest rates for subsidized Stafford student loans.

Harry Reid

Interest rates were set to jump from 3.4 to 6.8 percent at the beginning of July unless Congress acted before Sunday. The House approved a one-year extension of the current interest rates by a vote of 373-52, followed shortly by the Senate voting to approve it by a margin of 74-19.

They also voted to approve a simple one-week extension that President Obama is expected to sign into law by this weekend, and the one-year extension a few days later once the more complex bill is ready for his signature. He has been urging Congress to prevent the loan rate hike for months and made it an issue on the campaign trail.

Congressional Democrats and Republicans had long ago agreed on the need to prevent the interest rate hike, but until recently disagreed on how to pay for it (see Democrats, Republicans Remain at Odds on Student Loan Rate Freeze). Earlier this week, congressional leaders agreed to pay for the $6 billion cost of a one-year extension by limiting federal subsidies to undergraduates to up to six years, changing how companies can calculate funds set aside for pensions, and tying the fees that companies pay to federally subsidize their pensions to the inflation rate.

“This legislation proves that when Republicans decide to work with Democrats, we can do a lot to move our economy forward,” said Senate Majority Leader Harry Reid, D-Nev. “Thanks to this bipartisan agreement, seven million college students will not see their education costs rise by a thousand dollars next year. Because of this compromise, millions of workers in the transportation and construction industries know that their jobs will not disappear.”

The bill also provides over $100 billion in funding for highway, mass transit and other transportation programs over two years. Speaker of the House John Boehner, R-Ohio, praised the highway bill for ensuring that taxpayer dollars are spent on high-priority infrastructure projects and not on bike paths and beautification. Of the student loan rate freeze provisions, he added, “Despite the President’s efforts to make this a political issue and distract attention from his failed record on jobs, I’m pleased members of both parties in the Congress worked amicably to resolve the issue.”