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Compromise takes shape on student loans

Thursday - 7/11/2013, 2:30pm  ET

WASHINGTON (AP) -- A deal that would lower interest rates on student loans appears to be taking shape in Congress.

Lawmakers and their aides have been in talks about how they might reduce rates on subsidized Stafford loans. The rates doubled to 6.8 percent last week after Congress failed to act.

Efforts to restore the rates to 3.4 percent have been abandoned, in favor of a new compromise. Under the plan being considered, interest rates on new loans would be based on the 10-year Treasury note, plus an additional percentage for administrative costs. Undergraduate students would see a better deal than the current 6.8 percent rate, but could face higher costs if the economy improves and Treasury notes become more expensive.

Rates for students this fall would be around 4 percent. They would be capped at 8.25 percent in future years.

Graduate students could find better deals next year, but would again face higher rates than the current 7.9 percent. Borrowing for those loans would be at a rate of around 7 percent this fall. The rates would be capped at 9.25 percent in coming years.

Lawmakers are still working on specific rates, but they are in rough agreement on the numbers.

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APPHOTO DCJM301: Prospective students tour Georgetown University's campus in Washington, Wednesday, July 10, 2013. The defeat of a student loan bill in the Senate on Wednesday clears the way for fresh negotiations to restore lower rates, but lawmakers are racing the clock before millions of students return to campus next month to find borrowing terms twice as high as when school let out. (AP Photo/Jacquelyn Martin) (10 Jul 2013)

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