Friday, May 31, 2013

 

Student loan rates doubling; Obama pushes Congress to act

President launches new push to keep federal student loan rates from doubling on July 1, as the one-year fix passed during election season expires.


 Student loan rates set to double: Activists demonstrate against the rising cost of student loans for higher education.

Getty Images: File. Activists demonstrate against the rising cost of student loans for higher education.
WASHINGTON — President Barack Obama on Friday urged Congress to prevent an increase in student loan rates, saying rising college costs hold back the entire middle class and unfairly saddle young people with more debt just as they are starting out in their adult lives.

Interest rates on new subsidized Stafford loans are set to double, from 3.4 percent to 6.8 percent, on July 1. Lawmakers from both parties say they want to avoid the increase but are divided over how to act.

Obama made his case flanked by college students dressed in business suits and dresses during remarks in the Rose Garden on a steamy Washington morning. The event marked the beginning of a public campaign by the president to temporarily extend current student loan rates or find a long-term compromise to avoid the July 1 rate increase.
"We know that the surest path to the middle class is some form of higher education," Obama said. He said Americans now owe more on student loans than on credit cards. He said he and his wife just finally paid off their loans in the last decade and paid more on them than they did on their mortgage.

"We were lucky. We had more resources than many," Obama said. He said the debt is forcing some young people to delay buying cars and houses, which can hurt the economy overall.

Obama has proposed linking the rates to the financial markets. The Republican-controlled House passed a similar plan last week. But the differences between Obama's proposal and the House bill prompted a White House veto threat.
Obama's plan, unlike the Republican proposal, would lock in the rates for borrowers for the life of the loan. The Republican plan would set a cap but allow the rates to reset every year based on market conditions.

"The house bill isn't smart, and it's not fair," Obama argued.

Obama mounted a campaign last year to extend the rates for one year and rallied the support of college students during his re-election bid.

The doubling of the rate for subsidized Stafford loans on July 1 comes just as millions of new college students start signing up for fall courses. The difference between the two rates adds up to $6 billion.AP

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