WASHINGTON (8/12/13)--President Barack Obama signed a bill Friday afternoon that will lower the federal student loan rate to 3.86% for direct loans for undergraduate students, after it shot up to 6.8% in July.
The bill, known as the Bipartisan Student Loan Certainty Act, passed the U.S. House a little more than a week ago and was approved by the Senate a week before that.
The legislation ties federal student loan interest rates to the 10-year U.S. Treasury note. Individual rates will be locked in for the life of the loan. Students and their families will be protected from sharply increasing interest rates.
The administration estimates that the new rate cap law will save a typical undergraduate student $1,500 over the life of his or her loans.
"This legislation allows borrowers to benefit from the low interest rates currently available in the marketplace, guarantees that borrowers are able to lock in these rates over the life of their loans, and protects future borrowers by capping how high rates can rise," said a White House Blog entry.
The bill does not affect private student loan rates.