The U.S. Senate voted 81-18 to lower federal student loan interest rates from 6.8 percent to 3.86 percent. The fix is retroactive and will apply to loans taken out after July 1.

It does come with a hitch, however. The interest rate is tied to market rates on 10-year Treasury bonds with an 8.25 percent cap for undergraduates, 9.5 percent for graduate students and 10.5 percent for loans taken out by parents for their children.

President Obama called the deal "a major victory" for students.

"It meets the key principles I laid out from the start: it locks in low rates next year, and it doesn’t overcharge students to pay down the deficit," he said in a statement urging the House to follow the Senate's lead.

But not all Democrats share the president's enthusiasm.

Massachusetts Sen. Elizabeth Warren argued from the Senate floor that students will end up paying far higher rates later on. California Rep. Karen Bass called the legislation "immoral and irresponsible."

"The federal government should be a constructive partner in spurring reforms that help students and borrowers to attain a college education — not serving as a loan shark," Bass said in a statement. "When the federal government earns more in profits off of students than the largest corporations take home in profits, it’s time for a different approach. But sadly Washington continues to miss the mark in standing up for our students.”  

The House is expected to take up the legislation next week.
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(Photo: Mario Tama/Getty Images)