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Young Invincibles Statement on Student Loan Interest Rates Deal: Harmful for Students and Families

July 19, 2013

Colin Seeberger

Senators and the White House Strike Student Loan Interest Rate Deal that Helps Policymakers and Hurts Students and Families

[Washington, DC] — Senators and the White House agreed to a student loan interest rate deal on Wednesday. The Senate will vote on the proposal early next week. It makes permanent changes to student loans creating low rates next year at the expense of higher interest rates just a few years down the road.

The proposal ties interest rates on subsidized Stafford loans to the 10-year Treasury note, plus 2.05 percent. Interest rates for graduates would be pegged to the 10-year Treasury note, plus 3.6 percent. PLUS loan borrowers would see their rates pegged to the 10-year Treasury note plus 4.6 percent. There are three different caps: an 8.25 cap for undergraduates, a 9.5 cap for graduates, and a 10.5 cap for PLUS loan borrowers.

Below is a statement from Young Invincibles:

“This deal relieves political pressure on lawmakers to keep rates from doubling in the short-term. However, it does little to relieve the mounting pressure of student loans on millions of students and families in the long run. Instead, it locks in $184 billion in profit for the government on student loans and charges borrowers an extra $715 million in higher interest rates in order to pay down the deficit. Interest rates WILL rise far above 3.4%. The status quo just got worse for students and families. So why are lawmakers celebrating?”

The deal includes caps on how high the interest rates can go – a welcome addition – but the caps are too high, and the rates are set in a way that allows them to rise significantly. The rates will start out lower for students for the first few years, but interest rates on federal Stafford loans could easily jump above 6.8%, meaning the deal is actually worse than letting rates double. For some low- and middle income families, rates could surge into double digits. The changes may help lawmakers score political points, but it hurts young people’s chances to afford a college education over the long run.

Congress and the White House must show that higher education is a real priority. The next big opportunity is the Higher Education Act reauthorization and Congress must move quickly and work with students toward the goal of making a post-secondary degree more affordable and accessible for all students.


Young Invincibles is a national organization committed to amplifying the voices of young Americans, aged 18 to 34, and expanding economic opportunity for our generation. Young Invincibles ensures that young Americans are represented in today’s most pressing societal debates through cutting-edge policy research and analysis and innovative campaigns designed to educate, inform and mobilize our generation to change the status quo.