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College students across the country, you can now exhale. Today, a bipartisan group of senators announced a deal to stabilize rates on federal student loans. Two weeks ago, the rates for undergraduates doubled to 6.8 percent. Lawmakers have been working to avert the hike, but they couldn't agree on the basics until now, as NPR's Cory Turner explains.
CORY TURNER, BYLINE: Let's get the bad news out of the way first. Undergrads, you know that sweet rate you had up until July 1st, 3.4 percent? Well, sorry, but those days are over. Here's the good news, courtesy of Republican Senator Lamar Alexander of Tennessee.
SEN. ANDREW LAMAR ALEXANDER JR.: There are 11 million students headed for college who are borrowing money from the federal government. They're thinking about how to pay the bill, and for every one of them, the interest rates on their loans will be lower.
TURNER: Lower, at least from what they've been these past two weeks. How low? Well, new rates will be pegged to the 10-year Treasury note. That means for undergrads, the interest rate on loans taken out this year would be 3.86 percent. That's more than the old 3.4 percent, but it's not bad. And Republican Senator Richard Burr of North Carolina, he wanted to make this clear at today's announcement too: Subsidized or unsubsidized, your rate's the same.
SEN. RICHARD BURR: In other words, we're not asking some students to pay a surcharge to borrow under the student loan program so that they can subsidize others.
TURNER: As for graduate students this year, you're looking at just over 5.4 percent interest and Plus loans just over 6.4 percent. Now, as that 10-year Treasury rate goes up, so will the rates on new student loans. But Iowa Democrat Tom Harkin made clear lawmakers included a traditional safeguard.
SEN. THOMAS RICHARD HARKIN: And we put a cap, and a cap on the front end has always been a feature of the student loan program since its inception in 1958.
TURNER: Critics of today's deal say those caps are way too high: 8.25 percent for undergrads, 9.5 percent for grad students and 10.5 percent for Plus loans. The deal isn't entirely done either. It's Congress, after all, and the House has cobbled together its own version of a compromise. But there's not that much daylight between the two, and both sides expect something in place by the time students start taking out loans for the new school year.
This bipartisan bargain comes just one day after the Consumer Financial Protection Bureau released a pretty mind-boggling number. Total student debt, by the CFPB's latest estimates, is now close to $1.2 trillion. And the problem isn't just interest rates on federal student loans. It's the cost of an education.
At today's announcement, Maine's independent senator, Angus King, recalled a conversation he had years ago with a financial aid officer, who said for 50 years, the price of one year at a good private college roughly tracked with the price of a new Ford.
SEN. ANGUS STANLEY KING JR.: The last time I looked, a new Ford today, you can get a pretty good one for about $18,000, and you're talking almost $60,000 at a private college.
TURNER: So today's deal is a big deal, at least considering the alternative. But it will take a lot more than one compromise to ease the debt burden already weighing down the nation's new grads. Cory Turner, NPR News, Washington.