NAICU Washington Update

Subsidized Student Loan Interest Rate Jumps to 6.8 Percent … For Now

July 02, 2013

The interest rate for subsidized student loans jumped to 6.8 percent on July 1. The hike came after Congress failed to work out a deal to keep the rate at 3.4 percent, despite months of working on multiple proposals to either rewrite the student loan interest rate formula or keep the 3.4 percent rate for subsidized loans.

In spite of missing the July 1 deadline, Congress continues to work on the issue. The Senate plans to vote on several revised student loan interest rate plans on July 10. It is our understanding that senators needed more time to finalize their deal after working through the immigration bill, and that one of the rate plans is a bipartisan proposal.

Generally speaking, all of the proposals currently in the works affect not only subsidized loans, but also unsubsidized and PLUS loans. While the proposals would lower interest rates on loans for upcoming students, it is likely that interest rates would be tied to market rates in order to remain budget neutral. That could mean higher interest rates in the future.

NAICU’s Student Aid Committee has urged Congress to adopt a plan that (1) would ensure lower interest rates not be paid for by eliminating other student benefits, (2) the federal government not profit from students and families who must borrow to finance college, (3) loan provisions be clear and predictable from the beginning, and (4) provisions not encourage excessive borrowing.

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