Why July 1 Is a Ticking Time Bomb for College Students
President Barack Obama kicked off a new critical campaign for college students on Friday.
He wants to stop student loan rates from increasing in July. Unless Congress acts by July 1, student loan interest rates on new subsidized Stafford loans will double from 3.4 percent to 6.8 percent.
“It's like a $1,000 tax hike,” Obama said at an event in the Rose Garden with college students.
Tying the debt to the rebounding economy, he said people with student loans often delay major purchases such as cars and houses. Doing so hurts the overall U.S. economy.
Like all things in Washington, this issue immediately became divisive.
Republican Senate Minority Leader Mitch McConnell of Kentucky called Obama’s remarks a “campaign-style event.”
Both sides of the aisle agree that something has to be done about the student loan crisis—but the answer is unclear. Last year, Republicans went along with GOP presidential candidate Mitt Romney and voted to extend the low interest for loans. But 2012 was an election year and votes from college students were at stake. This year, it’s a different story.
Last week, the Republican-controlled House passed a plan to reset student loan rates every year in line with financial markets. Obama rejects this. He wants low student loan rates to be locked in, but not necessarily with the financial markets.
Meanwhile, Massachusetts Senator Elizabeth Warren wants student loan interest rates to lock in at about 0.75 percent, the same level that the Federal Reserve gives major banks.