Trump May Support 2.5% Student Loan Interest Rate Cap

Trump May Support 2.5% Cap on Federal Student Loan Interest

U.S. President Donald Trump has indicated that he might support a proposal to cap federal student loan interest rates at 2.5%, a move that could help millions of Americans manage the cost of higher education.

The proposal has gained attention after Republican Representative Anna Paulina Luna of Florida shared a video on social media showing Trump saying he “might” support an interest rate cap.

Luna said she has long supported lowering student loan interest rates, arguing that Americans pursuing higher education, particularly in science, technology, engineering and mathematics (STEM), contribute to the country's economic strength and competitiveness.

Congress Pushes to Lower Student Loan Interest Rates

In June, Luna introduced a resolution asking the House to consider legislation that would reduce federal student loan interest rates to 2%.

Another proposal was introduced by Republican Representative Michael Lawler of New York in March 2025. His Affordable Loans for Students bill also seeks to lower student loan interest rates to 2%. The legislation was referred to the House Committee on Education and the Workforce.

Democratic lawmakers have proposed a different approach. Representative Joe Courtney of Connecticut and Senator Peter Welch of Vermont reintroduced the Student Loan Interest Elimination Act on March 24, 2026.

The legislation would allow borrowers to refinance existing and future federal student loans at zero percent interest, according to a statement from Courtney's office.

Courtney has argued that interest payments place additional pressure on borrowers who are already struggling with rising living costs.

Millions of Americans Carry Student Loan Debt

The U.S. Department of Education announced in June that approximately 42.6 million people held federal student loans totaling around $1.7 trillion.

Interest rates on newer federal student loans range from 6.52% to 9.07%, depending on the type of loan. A cap of 2.5% could substantially reduce interest costs for eligible borrowers if a proposal becomes law and applies to their loans.

However, Trump's reported willingness to consider the idea does not mean the proposal has been approved. Legislation and further policy decisions would be needed before any new cap could take effect.

New Student Loan Repayment Plans Under the Trump Administration

The Trump administration introduced two student loan repayment plans on July 1 under the One Big Beautiful Bill Act.

One of the plans, the Repayment Assistance Plan, calculates monthly payments based on a borrower's income and reduces payments by $50 for each dependent, according to the Department of Education.

The administration has also faced legal challenges involving the Public Service Loan Forgiveness program. On October 21, it agreed to dismiss two appeals seeking to reinstate restrictions on the program, while a third appeal remained pending, according to court filings.

Earlier, federal judges in Massachusetts and Washington struck down an Education Department rule that would have excluded certain employers considered to have a “substantial illegal purpose.” Challengers argued that the department had imposed restrictions beyond the authority granted by Congress.

When Did Federal Student Loan Payments Resume?

Federal student loan payments and interest on eligible loans were suspended beginning March 13, 2020, during the COVID-19 pandemic.

Following multiple extensions under the Trump and Biden administrations, interest resumed on September 1, 2023. Most borrowers were required to resume payments in October 2023, according to the Congressional Research Service.

What Happens Next?

A potential 2.5% federal student loan interest cap could become an important issue in Washington as lawmakers debate ways to reduce education costs and financial pressure on American households.

For now, borrowers should understand that the proposal remains under consideration. Until a bill is passed and the relevant rules are finalized, existing loan interest rates and repayment requirements may continue to apply.