Move comes as feds prepare to increase rates for second straight year
U.S. Sen. Bill Nelson (D-FL) is renewing his call on Congress to take up and pass legislation he filed to cut federal student loan interest rates and allow borrowers with existing loans to refinance those loans to a new lower rate.
The move comes as the federal government prepares to increase federal student loan interest rates for the second year in a row.
“Higher education is becoming unaffordable for low- and middle-income individuals, and the federal government shouldn’t be putting it further out of reach,” Nelson wrote in a letter to the leaders of the Senate Health, Education, Labor, and Pensions (HELP) committee today. “I strongly urge you to include S. 1521, the Student Loan Relief Act of 2017, as part of any upcoming Higher Education Act (HEA) reauthorization to help provide some much-needed relief to both future and past student borrowers across the country.”
Starting July 1, interest rates for new undergraduate student loans will be 5.045 percent, up from 4.45 percent this year. For graduate students, rates will increase to 6.595 percent, up from 6 percent. And rates for Federal PLUS loans be 7.595 percent, up from 7 percent.
Nelson filed legislation last summer to cap federal student loan interest rates for undergraduate students at 4 percent, graduate students at 5 percent, and PLUS loans at 6 percent. The legislation is currently pending before the Senate HELP committee.
More than 43 million Americans currently have outstanding student loan debt. In Florida alone, students graduating with a four-year degree leave college with more than $24,000 in student loan debt on average. Federal student loan interest rates are set annually, with new rates taking effect on July 1 of each year.
Under current law, federal student loan interest rates are fixed for the lifetime of the loan and cannot be refinanced, even if rates go lower. Nelson says lowering the interest rate caps and allowing borrowers to refinance their existing loans would help make higher education more affordable for students across the country.
A copy of the letter Nelson sent to the HELP committee today to urge them to take up and pass his bill is available here.
A copy of Nelson’s bill is available here.
Recent background article on the upcoming rate hikes:
Interest rates on federal student loans to rise again this year
By Michael Stratford
05/09/2018 01:29 PM EDT
The cost of borrowing money from the federal government to pay for college is set to increase for the second year in a row.
The interest rates on new federal student loans for the coming academic year will jump by more than half of a percentage point following the Treasury Department’s sale today of 10-year notes, which is the government security to which the rates are tied.
For new undergraduate student loans, the interest rate will increase to 5.045 percent, up from 4.45 percent.
The rate on direct loans for graduate students will rise to 6.595 percent from this year’s 6 percent.
And the interest rates on federal PLUS loans — both for graduate students or parents paying for their children’s education — will be 7.595 percent, up from the current 7 percent.
The new interest rates take effect on July 1 for the 2018-2019 school year and are fixed for the lifetime of the loan.
The changes don’t affect borrowers who already have federal student loans.