- 07.25.13 07:32 AM EDT
The bill, which ties student loan rates to the market but also caps the maximum rate, is a band-aid meant to undo the doubling of student loan rates on July 1. The good news is it's retroactive, so students will borrow at 3.8%, close to the 3.4 it was before rates double. The bad news: it could later go as high as 8.25%.
A bipartisan group of Senators came to the deal on Thursday. This is after Congress failed to reach a compromise on an earlier rate increase: On July 1, a bill that kept student loan rates at 3.4% expired and rates doubled to 6.8%. This bill will cover any money borrowed in the interim, so students who took out loans between July 1 and the bill's passage will pay the new lower rate.
Democratic support was lukewarm, but ultimately both parties went along with the bill, since it was the only option to keep rates down. The President urged lawmakers to come together earlier in the week. Senator Dick Durbin, the second ranking Democrat in the chamber, spoke about the bill at a press event Thursday:
“While this isn’t the agreement any of us would have written -- and many would like to see something quite different -- I believe that we have come a long way in reaching common ground on a very, very difficult and challenging topic."
Under the bill undergraduates will borrow at 3.8% with a 8.2% cap, grad students at 5.4% with a 9.5 cap and parents would borrow at 6.4% with a cap of 10.5.