House Passes Direct Loan Interest Rate Changes

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August 1, 2013 · by mlivolsi · Spark Notes

Prepared by: Harrison Wadsworth (

The House, with a bi-partisan vote of 392-31, just passed H.R. 1911 as amended by the Senate, sending the bill to President Obama for signature into law.  The bill would modify Stafford and PLUS loan interest rates for loans made on or after July 1, 2013.  The House took up the compromise bill that passed the Senate last week without change, so no further Congressional action is needed before sending the bill to Obama, who is expected to sign it quickly.   

Today’s debate was limited to a total of 40 minutes, and members on both sides of the aisle voiced their support, starting with Education and Workforce Committee Chairman John Kline (R-MN) and Committee Ranking Democrat George Miller (D-CA).  Kline and other Republicans said the bill closely resembled the legislation that passed the House in June and talked about working with the support of the White House to convince Senate Democrats to support something similar – which in the end emerged as the Manchin-Burr bill that was amended into the House-passed legislation, H.R. 1911.  Miller and other House Democrats said that the compromise was much better for students than the original H.R. 1911 and would result in interest reductions compared to current law.  

The bill sets interest rates every academic year (July 1 through June 30) using the May auction of the 10-year Treasury Note as the index with various spreads for undergraduate and graduate students and for Stafford and PLUS loans.  The rates would reset every July 1 but would be fixed for the terms of all loans originated during that academic year.  A grid showing the various interest rates is pasted below. 

COHEAO has been in touch with the Consumer Financial Protection Bureau about guidance on how to change the Truth in Lending Act (TILA) disclosures for federal loans, which will have to be done quickly for potential borrowers of HHS health professions loans and many institutional loans.  The CFPB is expected to issue guidance soon after the President signs the legislation.  We have been assured that no one will be penalized for following the law on disclosures of Stafford and PLUS Loan interest rates until it was changed.  We have requested a reasonable period of time to permit institutions to update their TILA disclosure forms.


Loan TypeRate TypeIndexSpread2013-2014 Interest Rate (Based on 5/8/13 10-Year Yield of 1.81%)

Individual Loan Rate Cap
Stafford UndergraduateVariable Fixed10-year Treasury2.053.868.25
Stafford GraduateVariable Fixed10-year Treasury3.65.419.5
PLUS for parents of undergrads and graduate studentsVariable Fixed10-year Treasury4.66.4110.5