Tallahassee is the capital of Florida, home to Florida State University, Florida A&M University, and Tallahassee Community College. These educational institutions account for approximately 43 percent of the city’s population.
A large number of these students finance their education through federal student loans. This attractive option offers students convenient repayment options, loan deferments, and extremely low interest rates. Unfortunately, those rates are set to take an extreme upward hike on July 1, 2013 unless Congress reaches an agreement.
On July 1, the legislation that guarantees low federal student loan rates, such as 3.4 percent, is set to expire. Without another bill in place, federal student loan interest rates will double from 3.4 percent to 6.8 percent.
In preventative efforts, Minnesota and North Carolina Republican Representatives, John Kline and Virginia Fox, have chaired the Smarter Solutions for Students Act. The Republican bill mandates both unsubsidized and subsidized Stafford student loans be refigured each year based on the 10-year Treasury notes, plus an additional 2.5 percentage points.
Today, the Obama administration portended to veto the Republican legislation. The White House suggested the bill would burden families with uncertainty due to the proposed flexible interest rate. The suggested veto was met with staunch resistance from the bill’s chairman, Kline.
He stated, “Today’s announcement proves the president would rather pick a partisan fight with Congress instead of work in good faith on a bipartisan solution. The president’s unfortunate position does not alter our intent to advance the bill through the legislative process or our resolve to develop a long-term solution that both the House and the president can support.”
In contrast, the White House states, “The bill’s changes would impose the largest interest rate increase on low- and middle-income students and families who struggle most to afford a college education.”
President Obama’s plan has similarities with the Republican bill, in which both would review student loan interest rates annually and base it on the market’s rate. However, Obama’s plan would not adjust the interest rate on all student loans. His plan provisions for a fixed interest rate for existing loans, while new loans are established on the new adjusted interest rate. The Smarter Solutions for Students Act would place every student loan on market based flexible rates.
Currently, the bill is scheduled to be put to vote by the House of Representatives on Thursday. If passed, Obama may be forced to kill the bill with his presidential veto. Regardless, the Democratic-led Senate, which supports freezing interest rates until 2015, would have to approve the bill before it is enacted.