Interest Rate Reduction for Student Loan Debtors in the U.S.

U.S. President Donald Trump said he could support a regulation that would cap the interest rate on federal student loans at 2.5%. His statement revived discussions about reducing the debt burden of students who use loans to cover higher‑education costs in the United States.

Anna Paulina Luna Announces the Statement

Republican House Representative Anna Paulina Luna said on October 24 in a post from her X account that she would support limiting the interest on federal student loans to 2.5%. Luna noted that students pursuing higher education in science, technology, engineering, and mathematics (STEM) fields represent a significant gain for the country. However, Trump’s remarks suggested that he might support such a step rather than giving unequivocal backing to the regulation.

Interest Rate Reduction Previously Proposed in Congress

Lowering the interest rates on student loans has been a topic of discussion in Congress for some time. Luna presented a bill in June that aimed to reduce the federal student loan interest rate to 2%. Republican Representative Michael Lawler also drafted the Affordable Loans for Students bill, which envisions cutting the interest rate to 2% in March 2025. The bill is awaiting consideration on the House Education and Workforce Committee.

Interest‑Free Loan Offer from Democrats

Democrats have put forward a proposal to eliminate the interest burden on student loans. Representative Joe Courtney and Senator Peter Welch reintroduced the Student Loan Interest Elimination Act on March 24, 2026. The proposal aims to allow current and future federal student loans to be refinanced at 0 percent interest. Courtney said that student debt affects 43 million people, noting that interest payments add to the burden on borrowers struggling with living expenses.

Federal student loans total 1.7 trillion dollars

June data released by the U.S. Department of Education show that 42.6 million people have federal student loans and the total has reached $1.7 trillion. As of March 2026, approximately 9 million borrowers were in default on $220 billion in federal student loans.

Interest rates on new loans are rising to as much as 9.07%

Interest rates applied to Federal student loans for the new period range from 6.52% to 9.07% depending on the loan type. If a 2.5 percentage-point cap takes effect, it could lead to a significant reduction in current rates.

There are also changes in the refund payment system.

The Trump administration implemented new repayment options for federal student loans as of July 1, 2026. Among them is the income‑based Repayment Assistance Plan and the Tiered Standard plan, which offers fixed repayment terms of 10, 15, 20, or 25 years based on the debt amount. The proposal to cap the interest rate at 2.5% is also on the agenda as a separate policy headline from these existing regulations.