2253126009_5d2ef41758_bOn Wednesday, the Senate passed legislation to lower interest rates on student loans 81-18. If the bill is passed in the House, it will reach President Obama, who has expressed his support of the legislation and urged Congress to also tackle the rising cost of tuition and the existing $1 trillion in student debt.

The bill will retroactively lower interests rates as of July 1, counteracting the earlier doubling of student loan interest rates . As of now, the undergraduate Stafford rate will be 3.86 percent, while the graduate Stafford rate will be 5.41 percent. PLUS loans, which go to parents and graduate students, will be 6.41 percent for the 2013-2014 school year. The legislation will also tie interest rates to market rates and the 10-year Treasury note and cap the interest rates at 8.25 percent for undergraduate loans, 9.5 percent for graduate loans, and 10.5 percent for PLUS loans. These caps are all higher than the current rates.

Although proponents of the bill claim it is a long term solution, opponents have criticized it for likely shouldering future students with higher rates. Senator Elizabeth Warren, one of the 16 Democratic Senators who voted against the bill, says that the bill “asks tomorrow’s students to pay more in order to finance lower rates today.” She proposed an amendment with Senator Jack Reed (D-RI) to cap interest rates at current rates, but the amendment failed. Another amendment proposed by Senator Bernard Sanders (I-VT) to extend the new rates for two years also failed.

Media Resources: Sources: USA Today 7/24/13; Politico 7/24/13; Washington Post 7/24/13; Time 7/1/13; Bloomberg 7/24/13

photo by jjorogen via flickr