Student Loans

Congress Lowers Federal Student Loan Interest Rates

Why is the government in the lending business, again?

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Students heading to college this year will see lower interest rates on federal student loans, after Congress approved a bipartisan compromise to change the way the federal government sets interest rates on student loans.

The U.S. House approved the measure Wednesday by a vote of 392-31. The Senate passed the legislation by a vote of 81-18 on July 24.

Interest rates on subsidized Stafford loans doubled on July 1 from 3.4 percent to 6.8 percent when Congress failed to intervene.

The compromise legislation ties interest rates to the rate on high-yield 10-year Treasury notes, with caps of 8.25 percent for undergraduates and 9.5 percent for graduate students. Parents' interest rates would not exceed 10.5 percent.

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