- Senate Strikes Deal Over Student Loan Rates
- July 19, 2013
- Law Firm: McDonald Hopkins LLC - Cleveland Office
This week, in another bit of Senate bipartisanship - a rare occurrence in DC these days - a deal was struck over student loan rates. The House has previously passed legislation that would keep student loan rates from skyrocketing and would tie rates to the 10-year Treasury Note (a move supported by President Obama). The legislation had stalled in the Senate, however, after opposition from progressive Democrats.
The gridlock over student loan rates was finally broken this week as a group of Senate Democrats and Republicans brokered compromise legislation similar to the House legislation. The legislation will retroactively reduce interest rates on student loans that had doubled in recent months. It is expected that the Senate will consider - and likely pass - the compromise legislation next week.
For loans this fall, undergraduate students would pay an overall interest rate of 3.86 percent, which is 2.05 percent above the June 1, 10-year Treasury Note. Graduate students will pay 5.41 percent on loans this fall, which is 3.6 percent over the Treasury Note rate.
As the economy improves, the rate on the 10-year Treasury Note will also rise, resulting in an increase in student loan rates. Those rates will be 8.25 percent for undergraduates and 9.5 percent for graduates.
It is estimated that the tying of student loan rates to the 10-year Treasury Note will raise $715 million over the next 10 years, which will be used for reducing deficits.