Senate passes bill tying student loan interest rates to markets

The U.S. Senate passed a bill to tie student loan interest rates to the market on Wednesday, interest rates that will stay low this year but are expected to rise in later years.

Under the legislation, the federal subsidized and unsubsidized student loan interest rate would be about 3.9 percent for undergraduate students who take out new loans this year, according to a document from the office of Joe Manchin, the senator who sponsored the bill. The unsubsidized rate would be about 5.4 percent for graduate students.

Students with financial need can qualify for subsidized interest rates, which the federal government helps pay for and are lower than unsubsidized rates.

The legislation would cap undergraduate student loan rates at 8.25 percent and rates for graduate students at 9.5 percent. The act will only affect students who take out new student loans starting this year.

Recently, subsidized student loan interest rates had doubled to a fixed 6.8 percent after a law that kept them at 3.4 percent expired earlier this month.

The bill awaits approval from the House of Representatives and President Barack Obama.

Compiled by Kristen Taketa, Bruin senior staff.