Senate Crafts A Deal On Student-Loan Rates

Career College Central Summary:
  • The U.S. Senate is close to considering a bill that would largely undo the recent rate increase on subsidized student loans and change how rates are set on other types of federal student loans too.
  • The deal would peg interest rates to U.S. Treasury notes, but cap them at between 8.25 percent (for undergraduates) and 10.5 percent (for PLUS-loan borrowers). Loans to graduate students would carry a cap of 9.5 percent.
  • Under the deal, undergraduates would pay a rate equal to the rate on the 10-year Treasury note plus 2.05 percentage points. That would come to 3.85 percent for new loans this fall. Graduate students would pay 1.55 percentage points more, and PLUS borrowers another percentage point above that.
  • The interest rate on subsidized Stafford loans doubled, to 6.8 percent, on July 1, after the Senate failed to reach agreement on a bill to avert the increase.
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