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The Senate passed legislation today to link the student loan interest rates to the financial markets, providing lower interest rates right away but higher ones if the economy improves as expected. The vote was 81-18.

This means that students taking out federal loans this year with have a 3.86 percent interest rate, slightly higher than the 3.4 percent rate a majority of Democrats voted to preserve, but that was defeated by a Republican filibuster. Under the deal negotiated with Republicans, that low rate can increase to rates as high as 8.25 percent for undergraduates, 9.5 percent for graduate students, and 10.5 on PLUS loans available to graduate students and parents as the economy improves.

An amendment was offered by Sens. Jack Reed (D-RI) and Elizabeth Warren (D-MA) to cap the rates at 6.8 percent for undergraduate Stafford loans, and 7.9 percent for graduate and PLUS loans. Progressive Democrats, joined by almost every other Democrat, lined up in support, but the amendment failed, 46-53. A second amendment offered by Sen. Bernie Sanders (I-VT) would have sunsetted the new interest rates after two years. It was defeated 34-65. That means these increasing rates will now be policy. Fixed student loan rates are a thing of the past.

So the student loan debt that is already larger than credit card debt, larger than auto loan debt, will increase even more now, with students getting drawn in with low teaser rates, and being stuck with higher and higher rates as they continue their education.

Originally posted to Joan McCarter on Wed Jul 24, 2013 at 03:32 PM PDT.

Also republished by Daily Kos.

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