President Obama’s fiscal 2013 budget proposal would double the interest rate on federally backed student loans from 3.4 percent to 6.8 percent–eight months after the November presidential election.
The White House fiscal year 2013 plan calls for maintaining the current 3.4 percent interest rate for federally guaranteed student loans, but only through July 1, 2013, at which point it would automatically increase to 6.8 percent. Neither the president’s plan nor the Democrats’ legislation would extend the low rate beyond another year.
“Under current law, interest rates on subsidized Stafford loans are slated to rise this summer [July 1] from 3.4 percent to 6.8 percent,” reads the Obama budget. “At a time when the economy is still recovering and market interest rates remain low, it makes no sense to double rates on student loans. The Budget suspends the scheduled increase for the coming year, so that rates will remain at 3.4 percent.”
The Senate bill favored by Democrats states, “in the matter preceding clause (i), by striking ‘and before July 1, 2012,’ and inserting `and before July 1, 2013.’”
The Republican alternative legislation would also extend the low rate for only another year.