WASHINGTON — A bipartisan group of U.S. senators reached a deal late Wednesday night on a long-term change to interest rates on all new federal student loans — an agreement that had remained elusive for months, even as pressure mounted when the rates on some new loans doubled last week.
The agreement would tie the interest rate on new student loans to market conditions, a change that both the Obama administration and Congressional Republicans sought this year. Rates, based on the yield on 10-year Treasury bills, would vary from year to year, but be fixed over the life of the loan.
Rates would be capped so they couldn't rise indefinitely if interest rates spike: undergraduate loans would be capped at 8.25 percent, and graduate loans at 9.25 percent.
The compromise would be retroactive, so students taking out loans after July 1 would get the new interest rate. Based on Wednesday's Treasury yield, undergraduate loans issued today would have an interest rate of 4.5 percent; graduate loans, 6.5 percent; and PLUS loans, 7.2 percent. All are lower than the rates for those loans under current law.
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