The Senate has a student loan deal. Here’s what you need to know.

The Senate appears to have reached a deal to avoid hiking interest rates on subsidized Stafford loans, which make up about a quarter of all student loans the federal government issues each year. The deal ties the interest rates for all student loans to the 10-year Treasury rate, a change that Republicans in Congress, as well as the White House, have embraced for a while. Moreover, it keeps the subsidized Stafford loan rate for next year from spiking to 6.8 percent, which will happen in the absence of any Congressional action (and has already happened as a matter of law).

There was some haggling about the details of how that should work — House Republicans wanted a variable rate, a few Senate Democrats wanted to use the 90-day Treasury rate rather than the 10-year rate, some people wanted caps on rates and some didn't, etc. — but ultimately there wasn't a huge amount of policy space between the parties on this. To see how little, look at this table comparing the different plans (credit goes to Libby Nelson, then at Inside Higher Ed, for the original format here). Other than Elizabeth Warren, who offered up a weird and gimmicky plan to tie the subsidized Stafford rate to a totally unrelated rate the Fed uses to penalize banks, basically everyone wanted to use some kind of Treasury rate:

Confused about what the difference between subsidized and unsubsidized Stafford loans is, or what PLUS loans are? Check out my explainer from last month.

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Ezra Klein · July 18, 2013

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