WASHINGTON, D.C. – Nearly 8 million undergraduate students next year will see their student loan rates drop from 4.66 percent to 4.29 percent, saving borrowers millions of dollars in interest, according to senators who sponsored the Bipartisan Student Loan Certainty Act of 2013.

U.S. Senators Angus King (I-Maine), Lamar Alexander (R-Tenn.), Richard Burr (R-N.C.), and Joe Manchin (D-W.Va.) sponsored the legislation that tied student loans to market rates. It became law on August 9, 2013.

“At a time of skyrocketing student debt, it’s welcome news that our bipartisan solution is continuing to save borrowers billions of dollars in interest costs,” Senator King said. “Those are real savings that put money back into the pockets of students who can then invest it in their future. Our long-term fix has provided students with certainty about their borrowing costs and has gotten Congress out of the business of setting arbitrary interest rates.”

Senator Alexander said: “Student borrowers are going to save millions next year because Congress voted to give students the benefit of a market-based solution. This bipartisan permanent plan made students’ loans cheaper, simpler and more certain, as students know their rates will last for the life of the loan.”

“I’m thrilled that students across the country have seen the interest rates on their student loans drop for the next year, in addition to over $8 billion in savings from the past year,” said Senator Burr. “When I introduced the Bipartisan Student Loan Certainty Act, I knew this law would benefit 100% of students in the US, and with today’s news, our students and parents continue to reap the benefits. The facts now show that more controversial legislation would not have served students’ best interests. My bill was the right solution at the right time

“Some bedrock values define America, and one of them is pretty fundamental - we believe in opportunity,” Senator Manchin said. “By linking student loan interest rates to market rates, we have reduced the financial burden on students allowing them to focus on working hard to succeed in our competitive world and to help lead America to a better future for generations to come.”

Starting with loans issued on July 1, this year’s interest rate on undergraduate loans will be 4.29 percent, down from the current rate of 4.66 percent. Undergraduate loans are 84 percent of the total number of loans issued. The federal government is expected to loan nearly $100 billion to students next year.

The rate on graduate loans will be 5.84 percent, down from 6.21 percent. And interest for PLUS loans for graduate students and parents will be 6.84 percent, down from 7.21 percent.

Under the Bipartisan Student Loan Certainty Act, rates are tied to the government’s 10-year borrowing cost, specifically the yield on the last auction of the U.S. Treasury 10-year Note held before June of each year. The rates for undergraduate loans are the 10-year Note plus 2.05 percentage points—an addition to cover costs of defaults, collections, deferments, forgiveness, and delinquency. Undergraduate rates were also capped at 8.25 percent, so students will never have to pay more than 8.25 percent interest on their loans.

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