Millions of college students can breathe a little easier this fall.
Ending a months-long showdown, Congress is on track to approve legislation that will roll back a rate hike that nearly doubled the borrowing cost for federal student loans.
The Senate yesterday approved a bill that ties loan rates to the financial markets.
Undergraduates will be able to borrow at 3.86 percent for this school year. That’s a big improvement over the 6.8 percent rate that went into effect July 1 when Congress failed to reach an agreement.
While the bill will bring down rates in the near term, students are facing an uncertain future and rising interest rates. Some lawmakers say students can expect higher rates if the economy continues to improve.
US Sen. Kirsten Gillibrand (D-NY) said she has concerns about the proposal’s long-term affects on student debt.
“We should be providing loans at the lowest possible rate instead of locking young people into another $1 trillion of debt,” she said.
Student loans are still the least expensive borrowing option for college students. Under the new law, graduate students are able to obtain student loans at 5.4 percent, and parents can take out a loan at 6.4 percent.
The next step is to get the law passed by the House and President Obama, a supporter of the low student rates, before the August recess and the start of the fall semester.