<p>My kids have been taking out Direct Subsidized Loans at the interest rates of 3.4% for couple years now.</p>
<p>If my kids borrow again in September, will the interest rate be 3.4% or 6.8%?</p>
<p>At this time, the rate for the new loans is 6.8%. If Congress changes it back to 3.4%, it will be retroactive to July 1 (the date the rate changed). Only the rate for 2013-2014 loans will be 6.8% if Congress does not act … since Stafford Direct Loans are fixed rate.</p>
<p>The bill that passed the House would make all new federal loans into variable rate loans. In other words, the same loan may start at 4 percent, and then go up to 9 percent in a few years. The Senate has opposed variable rate loans.</p>
<p>There might be a vote on new interest rates soon. I read the rates would be capped at 8.25%. </p>
<p>Rates would be capped so they couldn’t rise indefinitely if interest rates spike: undergraduate loans would be capped at 8.25 percent, and graduate loans at 9.25 percent.
The compromise would be retroactive, so students taking out loans after July 1 would get the new interest rate. Based on Wednesday’s Treasury yield, undergraduate loans issued today would have an interest rate of 4.5 percent; graduate loans, 6.5 percent; and PLUS loans, 7.2 percent. All are lower than the rates for those loans under current law.</p>
<p>Read more: [Senators</a> reach long-term deal on student loan interest rates | Inside Higher Ed](<a href=“Senators reach long-term deal on student loan interest rates”>Senators reach long-term deal on student loan interest rates)
Inside Higher Ed</p>
<p>I wonder whether there would be any change to the subsidized loans being interest free while still attending school. That part of the plan is not mentioned much in any of the reports by the press.</p>
<p>I would be shocked if anything happens other than extending the 3.4% rate for a year. The other options are all in discussion stages, and there will be much discussion/debate/etc for quite some time.</p>
<p>A subsidized loan is by definition interest free during school - otherwise, it is unsubsidized. Grad sub loans were done away with effective the 2012-13 award year (and they were 6.8%, not 3.4% - so the rate didn’t increase - the subsidy was removed).</p>
<p>In the last couple days, the 3.4% extension for one year was about to be approved by the Senate with 51 votes, but all of the Republicans in the Senate fillibustered it.</p>
<p>The compromise deal is going to have to involve some sort of market-based interest rates in order to get through both houses.</p>