As he did last year at about this time, President Obama will urge lawmakers to stop the doubling of the federal Stafford student loan rate from 3.4 percent to 6.8 percent before the July 1 deadline, while voicing opposition to the House plan from Republicans that would tie rates to market indicators.
The president will push for keeping loans for college at lower rates during an event with students at the White House on Friday, White House Press Secretary Jay Carney said Wednesday.
The doubling of the Stafford loan rate would affect more than 7 million college students.
The House proposal that passed last week, 221-198, will get a veto from the president if it makes it to his desk, Carney said.
“While we welcome that House Republicans have paid some attention to this issue this year, their proposal unfortunately does not meet the task,” Carney said at a White House press briefing. “The president will call on Congress to pass a solution that truly helps keep college affordable for middle class families and students.”
Obama’s budget proposes a “cost-neutral reform” to set interest rates so they more closely follow those dictated by the financial markets, which currently are at historic lows. But Obama also calls for “more affordable repayment options” and does not agree with the formula outlined by the Republicans.
Obama and Congressional Democrats agree that the GOP plan would make college more expensive for students and families.
Democrats say it would force them into loans with interest rates that could fluctuate widely year by year, placing greater hardships on low-income families.
Instead, Obama will formally support freezing the current rate at 3.4 percent. Senate and House Democrats have pushed for a two-year continuation of the lower rate.
The measure approved in the House would tie federally-subsidized Stafford interest rates to the prevailing rate on the 10-year Treasury Note, plus 2.5 percent. Parent and graduate “PLUS” loans would be calculated using the 10-year Treasury note, plus 4.5 percent.
A Congressional Research Service (CRS) report on the Republican bill finds that it would leave students worse off than if these interest rates were allowed to double on July 1.
Stafford Loans are available both as subsidized and unsubsidized loans. Subsidized loans are offered to students based on financial need. The interest on subsidized Stafford loans is paid by the federal government while the student is in school and during approved deferments.