Source: Nick Anderson / The Washington Post
The House approved a Republican proposal Thursday to allow interest rates on federal student loans to rise or fall from year to year with the government’s cost of borrowing, ending a system in which rates are fixed by law.
The proposal cleared the GOP-led House on a largely party-line vote of 221 to 198, but it faces opposition in the Democratic-controlled Senate and a veto threat from the Obama administration.
The legislation responds to a looming deadline: On July 1, unless the law is changed, rates for a certain type of new loan for undergraduate students in financial need will double to 6.8 percent, from 3.4 percent.
Last year, facing a similar rate-doubling deadline during his reelection campaign, President Obama pushed Congress to freeze the 3.4 percent rate for one year. Mitt Romney, his Republican opponent, agreed. Now there is increasing talk of changing the loan system to avoid politicizing rates.
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