Sen. Jack Reed Proposes Changes to Student Loan Interest Rates

May 10, 2013

Staring down a July 1st deadline, lawmakers on Capitol Hill are looking at ways to control the costs of federal student loans. Senator Jack Reed is behind a measure that would overhaul how student loan interest rates are calculated.

Reed and a handful of democrats in Congress are pushing legislation that offers adjustable rates and caps the maximum interest rates on federal loans. The bill also allows borrowers stuck with high interest rates to refinance.

Congress has until July 1st before some federal student loan interest rates double from 3.4 percent to 6.8 percent.

A Republican-led House education committee is backing a plan to tie student loan interest rates to market rates with no cap.

Student loan debt has reached $1 trillion, topping credit card debt and saddling students with an average of $25,000 in debt.

If Congress makes no changes to some federal student loan programs, the interest rate will double to 6.8 percent on July 1st. That’s an extra $1,000 a year for the average student.

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