Don’t double my rate

Unless Congress can agree on a plan, Stafford loan interest rates will double in July.

Partisanship in the nation’s capital could lead to yet another manufactured crisis, this time directly impacting students and their checkbooks.

On July 1, the interest rates on subsidized Stafford student loans is set to double — from 3.4 to 6.8 percent — unless congressional Democrats and Republicans can agree on a plan to keep the rates from increasing.

While there is a general consensus in Washington that Congress must act to prevent interest rates from doubling, there is little agreement on how to do so. 

Last month, the Republican-controlled House of Representatives passed a bill that would permanently tie the interest rates to government interest rates, despite a veto threat from President Barack Obama. The House bill is similar to the plan laid out in Obama’s budget proposal, but the White House is skeptical of the plan because students and families will eventually be paying more as market rates rise. Under Obama’s plan, the rate would be set each year based on the market but remain fixed. However, his plan does not include a cap, something the House plan does offer.

Though the House plan does include a cap on rates, it’s set at 8.5 percent, which does not bring much solace to students. Also, though the plan would initially lower interest rates, they would continue to rise. According to a report in the Washington Post, by 2017 the interest rates are projected to climb to 7.4 percent and continue rising. In which case, it would be better if Congress simply let the interest rates double in July than move forward with the House plan.

The best possible plan would be to fix interest rates each year based on the market, as laid out in Obama’s plan, but also include a cap on interest rates. However, while many students might be unaware of the situation, it’s more than likely that partisanship in Washington will prevent any meaningful legislation from passing, allowing Stafford loan interest rates to double in July.