NAICU Washington Update

Congress Okays Lower Interest Rate for Subsidized Loans

July 05, 2012

Just before exiting for the July 4 recess, Congress finalized a one-year extension of the 3.4 percent interest rate for subsidized student loans, as well as flood insurance provisions, by rolling them into the highway bill.

With a scant 2 days before it was to expire, the $6 billion loan provision means that subsidized loans disbursed on/after July 1, 2012 and before July 1, 2013 will carry a 3.4 percent rate rather than a 6.8 percent rate as would have occurred without the legislation.

This benefits about 7 million students. The cost of the extension will be paid for from savings resulting from increased insurance premiums paid to the Pension Benefit Guaranty Corporation, and by eliminating subsidized loans for new borrowers after July 1, 2013, who exceed 150 percent of the published length of their education program.

President Obama will sign the legislation.