Obama set to sign bill to lower student loan interest rates

WASHINGTON (Reuters) - The House of Representatives on Wednesday passed a bill that would reverse a recent hike in federal student loan interest rates, lowering them to 3.86 percent for undergraduates in the new school year.

The House voted 392-31 in favor of the bill that will switch interest rates to a market-based system.

The bill pegs interest rates on student loans to the 10-year Treasury note plus 2.05 percentage points for undergraduates, and plus 3.6 percentage points for graduate loans.

Interest rates on student loans automatically doubled on July 1 to 6.8 percent from 3.4 percent after Congress failed to meet the deadline to prevent the rate increase.

Congress has since sought a retroactive fix that would keep new borrowers from paying the higher rate.

The bill, a result of extensive negotiations in mid-July among a coalition of U.S. senators composed of Democrats, Republicans and an independent, now waits to be signed into law by President Barack Obama.

(Reporting by Elvina Nawaguna; Editing by Eric Beech)

[Image of President Barack Obama speaks to members of Organizing for Action via AFP]