The interest rates on federal student loans are set to double at the end of June. The House of Representatives is expected to vote this week on a measure that ties those loans to the price the government pays to borrow money. But Democrats say that's still too expensive.
The Republican bill links interest rates on federal student loans to the rates for a 10-year Treasury note and tacks on a two-and-a-half percent fee. That means federal student loans would be about four-and-a-half percent — about one point above the current borrowing rate.
But, if Congress fails to pass a student loan bill by the end of June, the current interest rate automatically doubles to nearly seven percent in July.
Freshman Democratic Congressman Mark Takano of Riverside — a longtime educator and community college trustee — notes the GOP bill would cap federal student loans at eight-and-a-half percent. "The Republicans are proposing basically a variable interest rate," Takano said. "So their plan is worse than doing nothing."
Democrats complain the bill is coming to the floor for a vote without a hearing.
The Department of Education says only about one in four students with federal loans has a rate as low 3.4 percent; the rest already pay higher rates of up to eight percent. Private student loan rates can be much higher.