The Senate approved a plan Wednesday that would lower interest rates on student loans.

The plan would reduce interest rates on federal loans from 6.8 percent to 3.86 percent. But the new loan rate is linked to market prices, meaning that the interest rate could fluctuate with the economy, according to the bill.

The Senate voted to pass the bill after failing to reach a deal before July 1, which initially doubled interest rates for subsidized Stafford loans from 3.4 to 6.8 percent.

With the passing of the bill, rates on PLUS loans, federal loans issued to parents of college students, will be capped at 10.5 percent. The bill will lower these interest rates from 7.9 to 6.4 percent, according to the White House’s website.

The bill also lowered interest rates on loans given to graduate students with a decrease from 6.8 percent to 5.4 percent. Graduate student’s loans will be capped at 9.5 percent, while loans given to undergraduates will be capped at 8.25 percent.

Though the bill passed with 81 bipartisan votes, both Democratic and Republican senators said the proposed solution doesn’t address the $1 trillion students currently owe in loans.

Despite this opposition, the bill will now move to the U.S. House of Representatives. President Barack Obama voiced his support of the legislation, urging the House to pass the bill so that he can “sign it into law right away,” according to a statement issued by the White House.

The bill passed in the Senate on Wednesday will save undergraduates an average of more than $1,500 interest during the life of the loan, said Secretary of Education Arne Duncan in a statement issued by the White House. Duncan said the administration will continue to work with Congress to help decrease college debt.

“The President and I have always believed that the path to the middle-class runs through the classroom,” Duncan said. “Higher education should not be reserved only for those who can afford it.”

Published on July 25, 2013 at 10:26 am

Contact Annie: apalme05@syr.edu