Sec. 2. Reduction of interest rates for federal direct student loans
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Section 455(b) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(b) ) is amended by adding at the end the following: Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or 4 percent.
Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or 5 percent.
Notwithstanding the preceding paragraphs of this subsection, for Federal Direct PLUS Loans, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or 6 percent.
Notwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation Loan for which the application is received on or after July 1, 2018, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent. The Secretary shall determine the applicable rate of interest under this paragraph after consultation with the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
The applicable rate of interest determined under this paragraph for a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct PLUS Loan shall be fixed for the period of the loan. .
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