Obama’s Budget and Student Loans

According to Lynn O’Shaughnessy / MoneyWatch/ April 11, 2013,

President Obama seeks to end setting student loan interest rates.

Mr. Obama’s budget proposes aligning rates on new student loans to more closely follow market rates. The rates would be linked to 10-year U.S. Treasuries.

Today, Congress sets the interest rates on federal student loans. under the president’s proposal the unsubsidized rate would not reach 6.8 percent within at least the next 10 years.

Rates on new federal college loans would be based on the 10-year Treasury plus a cushion, depending on the type of loan. According to the CBO, the rates on the unsubsidized Stafford Loans would exceed their current 6.8 percent cap by 2016 and then top 8 percent by 2018 and stay there until 2023. The rates for Stafford borrowers would be fixed for the life of the loan even if interest rates dropped significantly.

Advocacy groups are unlikely to be pleased by such substantial future rate hikes.


About defaultprevention

Default Prevention Specialist since 1998.
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