Student loan rates to double if Congress does not act

Updated

President Barack Obama called on Congress Friday to pass his proposal that would prevent the interest rates on government-subsidized student loans from increasing in July. If his plan isn’t passed, rates will rise to 6.8 % automatically.

“I hear from students every single day – one is because I have a piece of legislation that would cap the interest rates and would also allow students not to pay more than 10% of discretionary income every month on their student loans and after 10 years – if they’ve been paid consistently, a good chunk of those loans would be forgiven,” California Rep. Karen Bass said on Andrea Mitchell Reports.

The California Democrat was referring to the Student Loan Fairness Act of 2013, legislation which she introduced in March. The proposal included a 10-10 standard for student loan repayment, eligibility to convert private loan debt into direct federal loans, a suspension of interest rates when borrowers are unemployed, a permanent cap on the interests rates for student loans at 3.4 % and rewards for graduates entering public service.

Bass also expressed her frustration with the House Republicans approach to capping the rates. The GOP plan would prevent the interest rate increase but allow them to vary with the markets.

“What the House Republicans essentially do is allow the student loan interest rate to be a variable loan, which means it has to be set every year and then they do have a cap on it but you know for example, what the loans are today – 3.4 % and we know that they’re set to double by July 1 – if the market fluctuates, then would know what the student loan rate will be next year at this time,” Bass said.

She expressed the need for a cap but doesn’t believe that “students should be subject to the fluctuation of the markets.” Bass also discussed the need for colleges to work together in lowering tutition payments.

“This issue should be about how does our economy lift people up and I think that proposals that would increase funding to Pell Grants and cap student loans period is the way that we ought to go, while we’re working to decrease tuition,” Bass said.

Student loan rates to double if Congress does not act

Updated