Senators Reach Deal on Student Loan Interest Rates, Prepare for Vote

July 19, 2013
Washington Post  
student loan news

Senate leaders are under pressure from the White House to advance a plan that would tie federal student loan interest to market rates, but with caps in place. Under the new proposal, undergraduates would all pay the same interest rate, and graduate students and parents of students would pay higher interest rates -- but still lower than currently -- with higher caps. Over the next school year, undergraduates would pay 3.86 percent interest, below the current fixed rate of 6.8 percent; but the rates could reach as high as 8.25 percent in the future. The graduate student rate -- also currently at 6.8 percent -- would start at 5.41 percent, with the potential to jump to 9.5 percent in the future. Parents' loans that carry 7.9 percent interest currently, meanwhile, would bear 6.41 percent interest, which could climb as high as 10.5 percent. Under this plan, the government is expected to make $715 million over the next 10 years, although Sen. Lamar Alexander (R-Tenn.) said this was not intentional and was the result of small gains on hundreds of billions of loaned dollars. Sen. Tom Harkin (D-Iowa) added a last-minute provision to the proposal that would require a Government Accountability Office study later this year on the cost of running the government’s education loan programs. Meanwhile, if the Senate bill passes muster, it will have to be reconciled with the House measure, which has already been approved.
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