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Student loans at temporary cheaper rate

Loans for current and former college students may find some relieve - for now. (Source: CNN) Loans for current and former college students may find some relieve - for now. (Source: CNN)

NEW YORK (CNN) – Good news for America's college students – the interest rate on your student loans won't be doubling after all.

They call it a compromise for a reason – the U.S. Senate reached a deal Thursday to keep student loan rates low, but only in the short term.

The deal comes two weeks after Congress let interest rates on federally subsidized Stafford loans double from 3.4 percent to 6.8 percent. Rates are now 3.86 percent for undergraduates. Graduate students will pay 5.4 percent, and parents will pay 6.4 percent.

The lower interest rates are retroactive so if you took out loans after July 1, 2013, the newer rates will apply.

There is a catch – rates will be tied to the interest rate on the 10-year U.S. Treasury Bond, meaning they're likely to go up in the coming years.

The Senate estimates rate could climb to as high as 7 percent for undergrads and 8.55 percent for grad students. The deal prevents rates from going higher than 8.25 percent for undergrads and 9.5 percent for grad students.

That's a result of compromise between Democrats, who wanted to extend fixed low rates, and Republicans, who wanted rates tied to an economic benchmark like the 10-year treasury.

Senators from both parties called their compromise a win for college students – at least for now.

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