- The fiscal 2014 budget proposal released by President Barack Obama on Wednesday suggests applying market-based interest rates to federal student loans instead of maintaining the current system that has them fixed by law.
- The measure is just one of several aimed at containing student loan debt, and while the budget isn't likely to be passed into law, it could help spark a student loan reform debate in Congress.
- Other proposals in the budget meant to address the over $1 trillion in student loan debt currently owed by Americans include a market interest rate that would remain fixed for life and expanding repayment options so borrowers don't pay over 10% of their discretionary income on loan bills.
From the article:
... In the current system, students pay the same fixed rate, now set at 3.4 percent, regardless of changes in other interest rates in the economy. Some economists and lawmakers have said the system is unfair to students who could end up paying more at a time when overall interest rates are still at an all-time low.
The president's budget comes just months before interest rates are set to double to 6.8 percent on millions of undergraduate subsidized Stafford loans if Congress does not act to once again extend a freeze on rate increases before July. ...