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Congress Set to Avert Undergraduate Student Loan Interest Hike

June 29, 2012—House Republicans and Senate Democrats June 28 announced an agreement on a 1-year extension of the 3.4 percent interest rates on subsidized Stafford loans for undergraduate students, averting the statutory July 1 increase to 6.8 percent. The extension is part of the conference agreement for a bill to reauthorize federal highway, transit, and other surface transportation programs (MAP-21, H.R. 4348, S. 1831). At press time, both the House and Senate were expected to pass the measure before adjourning for the Independence Day recess.

The conference provision represents a compromise between proposals from both sides of the aisle to offset the cost of maintaining decreased interest rates. Saving $1.2 billion, the agreement limits federal interest subsidies to “a period equal to 150 percent of the published length of the educational program in which the student is enrolled.” An additional $5 billion comes from changes to how companies calculate contributions and pay taxes on pension plans.

Stafford loans for graduate and professional students (including medical students) already carry a fixed 6.8 percent interest, and subsidized loans for those students will no longer be available after July 1, as mandated under the Budget Control Act (BCA, P.L. 112-25) [see Washington Highlights,  Aug. 5, 2011]. The AAMC estimates the BCA change will cost medical students on average $10,000 to $20,000 over the life of their loans.


Matthew Shick, JD
Director, Gov't Relations & Regulatory Affairs
Telephone: 202-862-6116


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806