Press Release
Posted:
WASHINGTON, D.C. — Today, U.S. Representatives Mike Thompson (CA-04) and James Moylan (Guam-AL) introduced the Lowering Student Loans Act, legislation to amend the Higher Education Act of 1965 and set a fixed 2 percent interest rate for all Federal Direct student loans.
The bill would establish a fixed 2 percent interest rate for all new Federal Direct Loans issued on or after July 1, 2026, including Stafford, Unsubsidized Stafford, PLUS, and Direct Consolidation Loans. It would also automatically reduce the interest rate to 2 percent for existing Direct Loans currently carrying higher rates. The 2 percent rate would be fixed for the life of the loan.
"Too many Americans are doing everything right only to see their balances grow because of high interest rates,” said Congressman Thompson. “This bill is a simple, targeted fix. By lowering interest rates to 2 percent and locking them in for the life of the loan, we help borrowers pay down their principal faster, reduce long-term costs, and finally make real progress toward financial stability.”
“For many students and families, the biggest barrier to opportunity is not getting into college—it’s the cost of paying back the loans afterward,” said Congressman Moylan. “Capping federal student loan interest rates at 2 percent is a practical step that helps borrowers reduce long-term costs, pay down their principal faster, and build financial stability. This bipartisan bill helps ensure that higher education remains a pathway to opportunity, not a lifetime of debt.”
What the Bill Does
- All new Federal Direct Loans issued on or after July 1, 2026, would carry a fixed 2 percent interest rate.
- Existing Direct Loans with rates above 2 percent would automatically be reduced to 2 percent beginning July 1, 2026, with advance notice to borrowers and the opportunity to opt out.
- The 2 percent rate would remain fixed for the life of the loan.
- Borrowers with certain older Federal Family Education Loan (FFEL) Program loans would have the option to consolidate into the Direct Loan program to access the lower 2 percent rate.
- The Secretary of Education would be required to notify borrowers and loan servicers of the change and establish a complaint resolution process to address any errors or delays.
The legislation does not change repayment plans, forgiveness programs, or borrower protections. It is narrowly focused on reducing interest-driven balance growth so borrowers can pay down principal faster and reduce long-term repayment costs.
You can watch the livestream of the press conference here.