<p>The above link has details on current proposals to modify federal student loan programs.</p>
<p>If Congress doesn't act, new subsidized Stafford loans taken out after the summer of 2013 will go up to 6.8%, and no new Perkins loans would be available after mid-2014 (which could be extended to mid-2015).</p>
<p>Both the President and the Congress are proposing a shift towards market based interest rates. The interest rate would be set when the loan is taken out, and remained fixed over the life of the loan. However, the loan rate for new loans would vary from year to year, based upon a certain percentage rate above what is being paid for federal Treasury Bonds. </p>
<p>According to the President's latest proposal, this would work out to initially lower the current rate for all new subsidized and unsubsidized federal loans (including unsubsidized Staffords and PLUS loans), because Treasury bond rates are currently very low. However, over the long-term, as interest rates increase, it could mean higher costs for new loans taken out in future years.</p>
<p>Several members of Congress are proposing market based rates, but that are higher than the President is proposing.</p>
<p>The chair of the Senate Committee that oversees the loans feels strongly that a maximum cap should be set on the loans, in case the Treasury bonds greatly increase in rates.</p>
<p>The President's latest proposal would shift new Perkins loans to being unsubsidized, with a market interest rate.</p>
<p>The President also wishes to direct more Federal funding to colleges with positive outcomes (such as high graduation rates) and moderate costs.</p>
<p>The attached post says that many observers don't expect the President and Congress will be able to agree upon a major overhaul as part of the budget talks, and that instead they will just agree upon another one year extension of current interest rates and policies.</p>