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.
The Lowering Student Loans Act is endorsed by the American Youth Association, National Association for College Admission Counseling (NACAC), National Association of Secondary School Principals (NASSP), National Association of Student Financial Aid Administrators (NASFAA), National Education Association, and Young Invincibles.
National Association for College Admission Counseling (NACAC)
“The National Association for College Admission Counseling (NACAC) is proud to endorse the Lowering Student Loans Act, which would set a fixed 2 percent interest rate on all federal student loans beginning July 1, 2026. By reducing rates for both new and existing loans, the bill offers practical, immediate relief to millions of borrowers and brings greater predictability to a system marked by rising costs and uncertainty. High interest rates fall hardest on students who already face steep barriers to college access. A stable 2 percent rate lowers long-term repayment burdens, strengthens financial stability, and helps keep higher education within reach. NACAC urges Congress to advance this commonsense measure to support students and families nationwide.”
— Sean Robins, Director of Advocacy, National Association for College Admission Counseling
National Association of Student Financial Aid Administrators (NASFAA)
“Students and families rely on federal student loans to make higher education possible, and they deserve interest rates that are fair, transparent, and manageable. The Lowering Student Loans Act would provide meaningful financial relief while committing to a predictable, stable interest rate that allows students to plan for the future with greater confidence. When borrowers can anticipate what their loans will cost over time, they are better positioned to make informed decisions about enrollment, completion, repayment, and long-term financial goals.”
— Melanie Storey, President & CEO, National Association of Student Financial Aid Administrators
Associated Students of the University of California (ASUC)
“As the External Affairs Vice President of the Associated Students of the University of California, I strongly endorse the Lowering Student Loans Act introduced by Congressman Thompson. Capping federal student loan interest rates at a fixed 2 percent would provide stability to a system currently relying on fluctuating, market-based formulas tied to U.S. Treasury yields. By lowering and stabilizing interest rates, this legislation would ease long-term financial strain, expand access to higher education, and empower more students to pursue their academic and professional goals without the disproportionate weight of debt.”
— Calvin Yang, External Affairs Vice President, Associated Students of the University of California
American Youth Association (AYA)
“Representative Thompson's legislation is critical for future generations of aspiring leaders. Student loan debt is one of the greatest barriers young Americans face when pursuing higher education. The burden of interest alone shapes life-changing decisions: where to go to school, financial freedom post-graduation, and even whether to go to school at all. This bill is a critical step forward that lowers student loan burdens and expands financial freedom. The American Youth Association is proud to endorse legislation that empowers the next generation of aspiring leaders to invest in their futures without being crushed by debt.”
— Aanya Ujjval, National President, American Youth Association
The Lowering Student Loans Act has been referred to the House Committee on Education and the Workforce.
