The Senate approved the new bipartisan student loan plan for government loans on the last day of July (2013). On July 1, student loan rates doubled from 3.4% to 6.8%. The new loan plan brings the rates back down, but with a twist. The old fixed-rate loan rates will be replaced with rates tied to financial markets.
The plan calls for Stafford Loans for both undergraduate and graduate students to be determined by 10-year Treasury bonds which are set each year before June 1. The rate at the time of the loan is good for the life of the loan. Presently, anyone who borrowed after July 1 of 2013 will be retroactively covered by the lower rate. This year the rate for undergraduates is 3.9%, and for graduate students it is 5.4%. Parents borrowing under the PULS Program will have their rates set at 6.4%. All rates, despite the current year’s Treasury bond rate, will be capped. Undergraduate loans are capped at 8.5%, graduate student loans are capped at 9.5%, and parent PLUS loans are capped at 10.5%.
With the new rates the government is expected to bring in an extra $200 billion on the new payback rates. The plan has yet to be passed by the House of Representatives, which has a similar plan on the table but with higher rates. Still, the House is expected to pass the bill being sent down by the Senate.