A bipartisan compromise on student loans promises better deals for students and parents over the next few years but could spell higher rates as the economy improves.
The Senate deal pegs the interest rates on new loans to the financial markets and was expected to come to a vote next week, well before students returning to campus this fall had to sign their loan agreements.
Under the deal, undergraduates this fall could borrow at a 3.9-percent interest rate. Graduate students would have access to loans at 5.4 percent, and parents would be able to borrow at 6.4 percent. Those rates would climb as the economy improves and it becomes more expensive for the government to borrow money.
The compromise heads off the doubling of rates on some students loans, which would cost students an extra $2,600.
At the White House, spokesman Jay Carney said President Obama was “glad to see that a compromise seems to be coming together.” And Sen. Lamar Alexander (R-Tenn.) said: “For every [student], the interest rates on their loans will be lower.”
At least for now. The compromise could be a good deal for students through the 2015 academic year, but then interest rates are expected to climb above where they were after the spring semester.