Sources: Senate works out deal on student loans

Associated Press

WASHINGTON

Heading off a costly increase for returning college students, a bipartisan group of senators reached a deal Wednesday that would offer students better rates on their loans this fall but perhaps assign higher rates in coming years.

The deal would offer students lower interest rates through the 2015 academic year, but then rates were expected to climb above where they were when students left campus this spring. The interest rates would be linked to the financial markets, but Democrats won a protection for students that rates would never climb higher than 8.25 percent for undergraduate students. Graduate students would not pay rates higher than 9.5 percent, and parents’ rates would top out at 10.5 percent.

Under the deal, all undergraduates this fall would borrow at 3.85 percent interest rates. Graduate students would have access to loans at 5.4 percent, and parents would be able to borrow at 6.4 percent. Those rates would climb as the economy improves and it becomes more expensive for the government to borrow money.

The deal was described by Republican and Democratic aides who insisted on anonymity because they were not authorized to discuss the ongoing negotiations.

A vote on the agreement could come as early as today, although it could be pushed back to the middle of next week depending on the Senate calendar.