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Big Hurdles for Student Loan Rate Agreement

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The interest rates on student loans issued by the federal government is set to double at the start of July if lawmakers cannot come to an agreement to extend the current rates. However, with just weeks until the deadline, federal officials say a number of obstacles still remain that would prevent the plan from going through.

U.S. Sen. Lamar Alexander, a Republican representing Tennessee, recently said that his party and the Obama administration still disagree on the state of the federal government’s current education policy, which in turn could endanger the current student loan interest rates of 3.4 percent, according to a report from CBS News. GOP lawmakers in the U.S. House of Representatives recently introduced and approved a bill that would tie federal student loan rates to those available in the market, rather than a set number. However, while the White House’s plan does the same, it also allows for less fluctuation of the rates over the life of the loan.

Another obstacle to these new allowances is that Republicans generally disagree with how the administration is setting national education policy, the report said. For instance, they believe Democrats are trying to freeze current mandates from the federal government, rather than giving more power to states themselves to decide their own education policies, and have moved to make the latter more possible.

“It puts Washington out of the business of deciding whether local schools are succeeding or failing,” Alexander said, according to the news agency. “It rejects the federal mandates that create a national school board, and prohibits the Education Secretary from prescribing standards or accountability systems for states. It continues the requirement that states have high standards and quality tests, but doesn’t prescribe those standards.”

In recent years, student loan debts have exploded nationwide, with the increase in both tuition costs and students’ reliance on financing those costs. While the interest rates on existing student loans will not go up, new student loans taken out after July 1 would see their rates double to 6.8 percent if federal lawmakers don’t reach an agreement.

Image: iStockphoto

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