July 20, 2024

Student Loan Update


Senators Reach a Tentative Deal to Lower Interest Rates Low

Today a bi-partisan group of Senators reached a deal that would lower the interest rates on college loans, change how the loan rate is determined, and introduce a cap on further increases.

On July 1st the interest rate on subsidized Stafford loans doubled from 3.4% to 6.8%, months after unsubsidized Stafford loans had also risen to 6.8% (see our previous update to learn more about the different types of loans).

The agreement, retroactive to July 1, would offer students lower interest rates through the 2014 and 2015 academic years, but then rates would be linked to the financial markets. Democrats won protections for students, with caps on interest rates at 8.25% for undergraduate students, 9.5% for Graduate students, while parents’ rates would top out at 10.5% on PLUS loans. Republicans successfully argued for linking the rates to market conditions.

Student loans are critical to ensuring that economically diverse and talented students can afford to pay for school. High loan rates discourage students from pursuing higher education, particularly a medical education, which often requires years of additional school.

The deal was reached by a group of Democrat and Republican Senators, including Senators Joe Manchin, (WV-D), Angus King (ME-I), Lamar Alexander, (TN-R), Tom Coburn (OK-R), Richard Burr, (NC-R), and Tom Harkin (IA-D).

There is no word yet on when the Senate will vote on the proposal, but it’s chances for passing are considered good, thanks to the bi-partisan nature of the agreement. The White House is also expected to announce support for the measure in the coming days. However, any bill would still need to pass the Republican-controlled House of Representatives.