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A Proposed Fix for High Student Loan Interest Rates

The interest rate on subsidized federal student loans is set to double to 6.8 percent on July 1
The interest rate on subsidized federal student loans is set to double to 6.8 percent on July 1Photograph by Christoph Hetzmannseder

The clock is ticking down to July 1, when the interest rate on subsidized federal student loans is set to double to 6.8 percent. That change will hit all new subsidized loans, but doesn’t affect existing debts. Amid the growing attention to student debt, Senator Sherrod Brown (D-Ohio) has a new bill that aims to help some of those existing borrowers who are stuck in loans with high rates.

Brown’s bill tries to build a refinancing market for private student loans, which make up about 15 percent of the $1.1 trillion in outstanding student debt. Private loans don’t have many of the repayment options that federal loans offer to struggling students, and many older loans can carry high interest rates that seem out of whack with today’s low rates. As we’ve reported before, there’s growing focus on finding ways for borrowers to refinance their debts—which is where Brown’s proposal comes in.