There has been considerable discussion among federal lawmakers in the last several months about the way to best approach coming hikes to student loan interest rates, but little progress has been made.
In the final few days before federal student loan interest rates are set to double from 3.4 percent to 6.8 percent, President Barack Obama is making one final push to convince lawmakers in Congress to extend the current levels, according to a report from the Washington Post. If nothing is done by lawmakers, the increase would go into effect on July 1, and the higher interest rate would be applied to all federal student loans obtained after that date.
Interestingly, the current rates have not been extended despite top party officials on both sides of the aisle saying they want to do so, the report said. Democrats want to push through the new interest rate extensions, but Republicans say they’re willing to do so only if the cost of the extensions are cut from other areas of the federal budget. The extension would likely cost some $6 billion, but Republicans have criticized Obama and the Democrats for being unwilling to have negotiations over any cuts. GOP lawmakers have issued several proposals that have been dismissed by Democrats.
“For the president, this is just another sad example of the election year strategy of deflection and distraction,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said on the Senate floor, according to the newspaper. “We’ve proposed multiple, multiple solutions…It’s time to stop playing games. It’s time for the president to act.”
It’s believed that the average student who received a higher interest rate would pay an additional $1,000 over the time it takes to pay back their balance, and the increase would probably affect some 7.4 million people nationwide, the report said. One potential proposal, from a Democrat, that seems to be gaining a little traction is one that would increase premiums that companies pay for pension insurance.
Currently, the typical college student graduates with some $45,500 in student loans to pay back, in addition to several thousand more dollars in debt spread across a number of credit card accounts. These balances can make it difficult for many young people to gain financial independence soon after graduating.
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