Servicemember Student Loan Bill Caps Refinancing Interest at 6% During Active Duty

The Servicemember Student Loan Affordability Act of 2025 is a targeted piece of legislation designed to give active duty military personnel a financial break on their student debt. Specifically, this bill amends the Servicemembers Civil Relief Act (SCRA) to extend a crucial protection: a 6% annual interest rate cap on certain student loan refinancing.

The 6% Rule Gets an Upgrade

Existing SCRA law already caps interest rates at 6% for debts taken out before military service begins. This new bill tackles a common scenario where a servicemember decides to consolidate or refinance their old student loans after they’ve already joined up. If you’re in the military and you take out a new loan to refinance or consolidate student debt you incurred before your service started, the interest rate on that new refinancing loan cannot exceed 6% while you are on active duty. This protection kicks in immediately when the new loan is incurred, ensuring that the financial relief starts right away.

What’s Covered (and What’s Not)

This benefit is laser-focused. The interest rate cap only applies if the new debt is solely for refinancing those pre-service student loans—defined as either federal Title IV loans or private education loans. Here’s the critical detail: if you try to roll other debt into that refinancing package—say, that credit card balance you meant to pay off—you lose the 6% cap protection entirely. The bill is clear that the debt must be exclusively for refinancing the specific pre-service student loans to qualify. This means servicemembers need to be very careful about how they structure any consolidation loans to ensure they don't accidentally bundle in non-student debt and void the rate reduction.

Real-World Impact: Stability for Servicemembers

For a young officer or enlisted person carrying $40,000 in student debt at a typical private loan rate of 8% or 9%, this change is significant. Reducing the rate to 6% means more money stays in their pocket, offering financial stability during deployments or moves. While the 6% rate is temporary—it only lasts for the duration of active service—it provides a crucial safety net. The flip side is that lenders providing these refinancing loans will have to absorb the cost of reducing the interest rate to 6% for their military clients, which could potentially make them less enthusiastic about offering these specific refinancing products.

Overall, this is a straightforward, beneficial update to the SCRA, ensuring that servicemembers who make smart financial moves to restructure their debt while serving aren't penalized with high interest rates simply because they consolidated their loans during their period of active duty.