A bipartisan group of senators on Wednesday reached a deal that, if passed, would fix the big jump in interest rates for federally backed student loans, sources told NBC News.
On July 1, rates went for new subsided Stafford loans doubled from 3.4 to 6.8 percent. Lawmakers on both sides of the aisle have decried the hike and have been working to figure out a deal before students return to campus this fall.
The tentative deal reached Wednesday evening would base future fixed-interest rates for student loans on the ten-year Treasury note plus an additional percentage, according to the sources.
Under the proposed deal, undergraduates this fall would be able access loans at a projected rate of 3.86 percent. Graduate students could borrow at 5.4 percent and parents could borrow at 6.4 percent. The cap was a key provision for Senate Democrats to agree to the deal.
And the agreement would set a long-term cap on undergraduate student loans at 8.25 percent, graduate students at 9.25 percent and parents’ rate could be as high as 10.5 percent.
Still, interest rates, which are based on financial markets, will continue to increase as the economy improves. That means loan rates may again rise above 6 percent in as soon as three years, according to senate projections.
However the rates will ultimately be capped, a key provision that Senate Democrats wanted in the final deal.
Announcement of a deal comes one day after a group of senators from both sides of aisle met with President Obama at the White House.