The William D. Ford Federal Direct Loan (Direct Loan) program is the primary federal student loan program administered by the U.S. Department of Education (ED). It is authorized by Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329). Four types of federal student loans are currently made available through the Direct Loan program: Federal Direct Stafford Loans (Direct Subsidized Loans), Federal Direct Unsubsidized Stafford Loans (Direct Unsubsidized Loans), Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. The interest rates that borrowers pay on federal student loans and other loan terms and conditions are specified in statutory language of the HEA and in regulations promulgated by ED. Throughout the history of the federal student loan programs, numerous changes have been made to the statutory provisions that specify the criteria for setting the interest rates paid by borrowers. At present, different fixed interest rates apply to each of the types of loans currently being made. Under current law, during award year (AY) AY2013-2014, Direct Subsidized Loans are being made with a fixed rate of 6.8%. Under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84), the fixed interest rates applicable to newly made Direct Subsidized Loans had been incrementally lowered over a period of several years from 6.8% to 3.4%; however, the 3.4% interest rate was not made permanent. Under the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141), the authority to make Direct Stafford Loans with a 3.4% interest rate was extended through AY2012-2013. This authority expired June 30, 2013, after which Direct Subsidized Loans made for AY2013-2014 and future years will have a fixed interest rate of 6.8%. Under current law, Direct Unsubsidized Loans are being made with a fixed rate of 6.8%, and Direct PLUS Loans are being made with a fixed rate of 7.9%. Direct Consolidation Loans are made with a fixed rate that is the weighted average of the interest rates of the loans being consolidated, rounded up to the next higher one-eighth of 1%. The 113 th Congress is considering a range of proposals applicable to student loan interest rates. These include proposals to temporarily extend the current 3.4% interest rate on Direct Subsidized Loans as well as long-term proposals to establish a new interest rate structure for all loans made through the Direct Loan program during AY2013-2014 and future years. This report examines the interest rates borrowers are charged on federal student loans made through the Direct Loan program. It provides a brief summary of the current, statutorily specified, fixed interest rate structure applicable to loans currently being made. This is followed by brief descriptions of proposals that have been made during the 113 th Congress to either temporarily extend the authority to make Direct Subsidized Loans with a fixed 3.4% interest rate or to establish a new interest rate structure for Direct Loans made during AY2013-2014 and future years. Several proposals are reviewed: the President's FY2014 budget proposal, H.R. 1911 , S. 953 , S. 1003 , S. 897 , and the Senate amendment to H.R. 1911 . For each proposal, information is presented showing a summary of the proposed interest rate structure, projections of future interest rates, and estimates of the interest expenses typical borrowers might be expected to pay if currently projected interest rates applied for future years. The report concludes with a discussion of factors that might be considered when weighing alternative student loan interest rate policy options. Legislation enacted in 2002 ( P.L. 107-139 ), contained provisions that led to a transition over a period of several years to the current fixed interest rate structure for student loans. With fixed rate loans, the interest rate that is in effect at the time the loan is made remains in effect until the loan is paid in full. The amendments to the HEA enacted under P.L. 107-139 affected the interest rate structure for student loans that would be made during AY2006-2007 and later years. Direct Subsidized Loans and Direct Unsubsidized Loans would have a fixed interest rate of 6.8%; and all Direct PLUS Loans would have a fixed rate of 7.9%. In 2007, under the CCRAA, incrementally lower fixed interest rates were established for Direct Subsidized Loans to be made to undergraduate students during the four-year period spanning AY2008-2009 through AY2011-2012. The CCRAA did not make any changes to the interest rate specified for Direct Subsidized Loans made to undergraduate students beyond that period, which would be made at 6.8%. In 2012, under MAP-21, the authority to make Subsidized Stafford Loans with a 3.4% interest rate was extended to apply to loans made during AY2012-2013. Under current law, a fixed interest rate of 6.8% will apply to Direct Subsidized Loans made during AY2013-2014 and future years. A summary of the fixed interest rates applicable to Direct Loans made during AY2006-2007 through AY2013-2014 is presented below in Table 1 . In the 113 th Congress, numerous proposals have been made to amend or extend current policy for establishing the interest rates that borrowers pay on federal student loans made through the Direct Loan program. Brief descriptions of several of these proposals are provided below. This is followed by a side-by-side comparison of the proposals, presented in Table 2 . President Obama's FY2014 budget would establish a market-indexed, fixed interest rate structure for all Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans made during AY2013-2014 and future years. Under the President's proposal, the interest rate in effect for the award year during which the loan is made would remain the same from the time the loan is disbursed until it is paid in full. On an annual basis, a new fixed interest rate would be established for loans to be made during the upcoming award year. The interest rate would be indexed to the rate on the 10-year Treasury note at the beginning of the award year; and would be increased by a margin, or interest rate add-on, that would differ by loan type. There would be no cap to limit the maximum interest rate a borrower could be charged. Under this proposal, the interest rate on Direct Subsidized Loans would be the 10-year Treasury note rate, plus 0.93 percentage points; the interest rate on Direct Unsubsidized Loans would be the 10-year Treasury note rate, plus 2.93 percentage points; and the interest rate on Direct PLUS Loans would be the 10-year Treasury note rate, plus 3.93 percentage points. Under the President's proposal, individuals who borrow multiple types of loans (e.g., Direct Subsidized and Direct Unsubsidized), or who borrow loans over a period of successive years would likely have different fixed interest rates on each of their loans. The President's proposal would also remove the interest rate cap on Direct Consolidation Loans. Thus, the interest rate on Direct Consolidation loans would be determined by taking the weighted average of the interest rates on the loans being consolidated and rounding the rate up to the nearest higher one-eighth of 1%. In conjunction with this student loan interest rate proposal, the President also proposed several other student loan-related changes, including the expansion of eligibility for borrowers to repay according to the Pay As You Earn (PAYE) repayment plan, and the exclusion from taxation of student loan balances forgiven after completing the maximum required repayment period under the income-based repayment (IBR) and income-contingent repayment (ICR) plans. Under the PAYE repayment plan (which is one version of the ICR plan), borrowers' monthly student loan payments are limited to no more than 10% of their discretionary income, and any student loan balance that remains 20 years after entering repayment is forgiven. The President proposes to extend the PAYE repayment plan to all borrowers of Direct Loans, regardless of when they first obtained their loans. In addition, while at present, any student loan balance that is forgiven following the culmination of repayment according to the IBR or ICR plans is considered part of an individual's gross income and thus subject to the individual income tax, the President proposes that any such amounts forgiven after December 31, 2013 would be excluded from gross income, and thus exempt from taxation. CBO estimates that enactment of the President's FY2014 Budget student loan interest rate proposal would increase direct (mandatory) spending by $29.8 billion over the period of FY2013-FY2018; and would reduce direct spending by $6.7 billion over the period of FY2013-FY2023. According to CBO, the President's proposed expansion of the PAYE repayment plan, if enacted, would increase direct spending by $3.6 billion, all in FY2013. The Joint Committee on Taxation estimates that the President's proposal to provide an exclusion from income of amounts forgiven following repayment according to the IBR or ICR plans would have no effect on revenues over the period of FY2013-FY2018; and would lead to a reduction in revenues of $5 billion over the period of FY2013-FY2023. H.R. 1911 would establish a market-indexed variable interest rate structure for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans made during AY2013-2014 and future years.