On August 8, President Obama signed into law a bipartisan compromise cutting interest rates on all new student loans this year and saving a typical undergraduate student $1,500 over the life of his or her loans. The plan allows borrowers to benefit from the low interest rates currently available in the marketplace and guarantees borrowers are able to lock-in rates over the life of their loans. In the future, fixed rates will be determined each year by market conditions, helping ensure that borrowers’ rates are more in line with the government’s own cost of borrowing, while capping how high rates can rise.
Under the new law, some 11 million borrowers will see their interest rates decrease on new loans made after July 1, 2013. About 8.8 million undergraduate borrowers will see rates drop from 6.8% to 3.86%, while about 1.5 million graduate unsubsidized Stafford borrowers will see rates drop from 6.8% to 5.41%. Moreover, over 1 million Grad PLUS and Parent PLUS borrowers will see rates drop from 7.9% to 6.41% (the first reduction in years).
In the weeks and months to come, the Administration will continue to work with Congress to tackle rising college tuition and unaffordable debt. Also, a new analysis by the Consumer Financial Protection Bureau takes a closer look at the more than $1 trillion in outstanding federal student loans, as well as alternative repayment plans to lower payments.In addition, as part of the Department’s Student Voices Series, Secretary Duncan met with college student leaders from across the country, nominated by their State Higher Education Executive Officers to discuss a wide range of ideas and strategies on college access, affordability, and completion.