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Update: Federal Student Loan Legislation Signed Into Law

On August 9, President Obama signed into law the Bipartisan Student Loan Certainty Act of 2013. This legislation reduces the interest rates on federal Stafford loans and is retroactive to July 1. Future loan rates will also be tied to the financial market.

What does this mean for students right now? For this academic year (2013-14) and the next (2014-15) for new subsidized federal loans, undergraduates will pay an interest rate of 3.86%, graduate students 5.41%, and parents (PLUS loans) 6.41%. The interest rate of the loan will remain fixed for the term of the loan.

What does the reform mean for future students? Future federal loan rates will be tied to the rate of 10-year Treasury bonds but will have a cap. The rate of each new loan will remain fixed for the course of the loan. Here’s a summary of what this means:

  • Undergraduate loans = interest rate on 10-yr Treasury bonds + 2.05% to a max of 8.25%
  • Graduate student loans = interest rate on 10-yr Treasury bonds + 3.6% to a max of 9.5%
  • Parent loans = interest rate on 10-yr Treasury bonds + 4.6% to a max of 10.5%