Federal lawmakers have been mulling ways to address the growing problem of student loan debt and rising instances of delinquency and default on those accounts, but now conflicting views as to how to do so has stymied progress on Capitol Hill.
There are only a few months to go for Congress to decide whether it will keep interest rates on student loans issued by the federal government at their current level of 3.4 percent, or allow them to double to 6.8 percent, as reported by The Hill. The deadline to make such a decision is July 1, and experts say that if the rate is allowed to double, it could be extremely costly for millions of Americans who rely on this type of financing to cover the high and growing cost of attending college.
Currently, U.S. Rep. Joe Courtney, a Democrat representing Connecticut who serves on the House Education and Workforce Committee, has legislation that would extend the existing rate for two more years with the provision that Congress would have that time period to more comprehensively address the issue going forward, the report said. This idea has a little support from the U.S. Student Association, an organization which would prefer to see the current 3.4 percent rate put in place permanently.
However, such a proposal, put forth by Rep. Karen Bass of California, also a Democrat, doesn’t even have the support of President Barack Obama, whose latest budget calls for the ongoing rate to be tied to the market in some way, the report said. That plan has broader support among even the GOP.
“My Republican colleagues and I have long believed returning to a market-based system for determining interest rates just makes sense, and will provide more stability for borrowers,” U.S. Rep. John Kline, a Minnesota Republican who chairs the Education and Workforce Committee, told the site. “However, the devil is in the details.”
The average college graduate now leaves school with tens of thousands of dollars in student loan debt, as well as several thousand more in credit card bills and even auto loan obligations, all of which can combine to make it extremely difficult for these young adults to establish their financial independence soon after entering the real world.