AP: House to vote on variable rate student loans
House lawmakers are ready to pass legislation that links student loan rates to the financial markets in spite of a veto threat from President Barack Obama.
Supported by Republicans, the bill would avoid a rate increase for students with new subsidized Stafford loans if lawmakers pass it, as expected, on Thursday. Democrats generally opposed the measure, which would provide some students a deal in the first years of the new system before ratcheting up interest rates later.
"As the economy continues to recover and at a time when market interest rates are at historic lows, more than 7 million students who rely on these loans to finance postsecondary education should not be burdened with additional college debt as they seek to graduate, launch a career or a business, start a family or buy a house," the White House Office of Management and Budget said in a memo announcing its opposition.
"I'm not really thrilled with the Republican plan, which would make student loan interest rates a variable interest rate and could rise above 6.8 percent, which is what the interest rate would rise to if Congress did nothing," said Rep. Mark Takano, a California Democrat who taught in public high schools before his 2012 election to Congress. "The Republican plan is unacceptable and worse than if we do nothing."
Under the GOP proposal, student loans would be reset every year and based on 10-year Treasury notes, with added percentage points. For instance, students who receive subsidized or unsubsidized Stafford student loans would pay the Treasury rate, plus 2.5 percentage points.