Analysis of Proposed Student Loan Interest Rate Cut

This week, the new House leadership plans to introduce legislation that would cut the interest rate on certain student loans in half. The high profile of this proposal shows just how concerned the American public has become about rising student debt levels.

The Project on Student Debt has prepared a brief analysis of this bill, which would reduce interest rates on Federal Subsidized Stafford Loans for undergraduates from the current 6.8% to 3.4% over the next five years. When fully phased in, borrowers on a 10-year repayment plan would see their payments reduced by 14%, saving $4,000 in interest costs on $20,000 in covered loans.

"The House proposal would provide meaningful interest relief to new borrowers. When fully implemented, students with covered loans would see their payments reduced by nearly 15 percent. That's not chump change, but it's just a start. To address student debt burdens, we also need to do more to reduce the need to borrow, and to provide protections for all borrowers, including students who are in school now."

-- Robert Shireman, Executive Director of the Project on Student Debt

Read the analysis

Read the press statement

(This announcement was sent to the Project on Student Debt mailing list on January 11, 2007)