The Washington Post recently reported that a deal to scale back the recent doubling of federal interest rates for certain undergraduate loans was recently passed both houses of Congress and signed into law by President Obama. The agreement covers those loans plus other higher education loans by the federal government.
The deal ties the interest rate to the rate for 10-year Treasury notes plus a specified percentage that varies by loan type. For instance, according to the Post, the rate for subsidized and unsubsidized Stafford loans will be 2.05 percentage points higher than the Treasury rate. For unsubsidized graduate Stafford loans, the rate is 3.6 percentage points higher than the Treasury rate. For the PLUS loan, which is available to parents and graduate students, the rate is 4.6 percentage points higher than the Treasury rate. The rates are fixed for the period of the loan.
Under the new law, for the 2013-2014 academic year, loan rates will be set at 3.9% for undergraduates, 5.4% for graduate students, and 6.4% for PLUS loans. The interest rate for subsidized undergraduate loans doubled, from 3.4% to 6.8%, on July 1. The U.S. Department of Education will retroactively apply the lower interest rates to loans taken out since July 1.
The deal also establishes interest rate caps for each of the loans: 8.25% for undergraduates, 9.5% for graduates, and 10.5% for PLUS loans.
