House Expected to Approve Senate-Passed Student Loan Interest Rate Measure

​The U.S. House of Representatives this week is expected to concur with a U.S. Senate-passed bill that would tie federal student loan interest rates to market rates, retroactive to July 1.

Last week, the Senate voted 81-18 to peg student loan interest rates to the rate on 10-year Treasury notes, plus the following margins:

  • 2.05 percent for Stafford loans to undergraduates, resulting in a rate of 3.86 percent for loans first disbursed July 1, 2013, through June 30, 2014. Regardless of future Treasury note rates, the legislation caps the rate on Stafford loans to undergraduates at 8.25 percent.
  • 3.6 percent for Stafford loans to graduate and professional students, resulting in a rate of 5.41 percent for loans first disbursed July 1, 2013, through June 30, 2014. Regardless of future Treasury note rates, the legislation caps the rate on Stafford loans to graduate and professional students at 9.5 percent.
  • 4.6 percent for PLUS loans, resulting in a rate of 6.41 percent for loans first disbursed July 1, 2013, through June 30, 2014. Regardless of future Treasury note rates, the legislation caps the rate on PLUS loans at 10.5 percent.

The new interest rate formula is comparable to one approved in May by the House. The Senate version locks in the rates for the life of the loan.

Senators rejected two Democrat-proposed amendments — one would have capped rates on loans to undergraduates at 6.8 percent; the other would have ended the market-based rate formula after two years. Some Senate Democrats expressed misgivings about the bill, citing the additional cost to students of expected increases in future interest rates.

If approved by the House and signed into law by President Obama, the measure would end weeks of partisan contention over how to address a doubling of interest rates on subsidized Stafford loans.