By Jennifer Liberto, CNNMoney
Washington (CNNMoney) –The Senate on Wednesday approved a bipartisan deal that ensures lower interest rates on loans for students heading to college this fall.
Senators voted 81 to 18 to lower interest rates for undergraduates taking out government loans this school year to 3.86% - cheaper than the 6.8% interest rate that kicked in on July 1. The new rates would be retroactive and apply to loans taken out after July 1.
However, the bill has provisions for rates to go higher in coming years. It is expected to become law, with support from the White House and the House of Representatives, which will likely take up the bill in coming days.
"This fall, all undergraduates, subsidized or unsubsidized, would only have to pay 3.86% interest rate for the life of the loan," said Sen. Tom Harkin, an Iowa Democrat, whose support was key to a Washington deal. "That means real savings for borrowers."
It doesn't apply to loans that students get from private lenders. It only affects Stafford loans, which are made by the U.S. government to help finance a college education. Students can apply through their university financial aid office. The loans are limited to no more than $5,500, for a mix of subsidized and unsubsidized loans for the freshmen year and $7,500 for juniors and above.
On July 1, the interest rate on subsidized Stafford loans doubled from 3.4% to 6.8%.