A bipartisan group of lawmakers is pushing to cap federal student loan interest rates at just 2 percent, which could significantly reduce the long-term cost of higher education for millions of Americans.

The proposal under House Resolution 1386 would overhaul how student loan interest is calculated, replacing the current system with a flat, fixed rate.

A 2 percent cap would bring rates closer to pandemic-era lows, when borrowing costs were significantly cheaper.

And for borrowers, interest is often what drives total repayment, not just the original balance. High rates can add years of payments and tens of thousands of dollars to what students initially borrow.

Across the country, Americans collectively hold about $1.69 trillion in federal student loan debt, with an average balance of roughly $39,547 per borrower.

The lawmakers behind the bill argue that high rates are artificially inflating debt burdens and preventing Americans from buying homes and saving for retirement, and this could ease some of that struggle.

“This is a game-changer for millions of Americans looking to build a better future without the weight of overwhelming student loan debt holding them back. By adjusting the rate to 2 percent and doing this retroactively, we’re giving borrowers the flexibility they need to pay off their debt without unnecessary obstacles, like the outrageous additional cost post-graduation that is now synonymous with quality education,” Representative Mike Lawler, a Republican from New York, said in a statement.

Borrowers could save over $300 per month at higher debt levels.

“While lowering the interest rate on new and existing student loan debt to 2 percent wouldn't completely eliminate those monthly payments, it would go some way to lowering borrowers' monthly payments, especially for those who carry a sizable balance,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.

The largest benefit is not just lower monthly payments but dramatically reduced lifetime interest, experts say. However, there are serious barriers to actually getting this type of change passed in law.

“For existing borrowers, lower rates would obviously reduce borrowing costs,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “The problem is the unintended consequences. A program like this would likely encourage excessive borrowing and increase the government's exposure to unnecessary debt.”

For a typical borrower with around $30,000 to $40,000 in debt, a 2 percent rate could mean paying thousands less in interest and eventually paying off their loans faster. That would provide them greater ability to save for a home, build retirement savings or even start a business.

At higher borrowing levels, especially for graduate or professional degrees, the savings become even more significant, potentially exceeding $30,000 over time.

“Congress remains very divided on how to handle student loans, and past attempts to ease or eliminate the financial burden have mostly failed to gain traction,” Beene said. “Still, a lower interest rate could be a more politically popular solution in the future, as it doesn't provide outright forgiveness while also easing the monthly expenditure millions of borrowers face.”

The proposal tied to H.Res. 1386 is still in early stages and has been referred to the House Rules Committee.

“The government earns serious revenue from student loan interest,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “Capping it at 2 percent when the 10-year Treasury's around 4.4 percent means the feds lose roughly $16 billion over 10 years. Republicans won't vote for that without massive tax hikes or program cuts.”

Contact Newsweek editors on this story: Jenni Fink and Sam Wilson.