WASHINGTON -- The House of Representatives passed a bill Thursday that would create variable interest rates for student loans, but the measure is likely to stall since Senate Democrats strongly oppose it and President Obama has vowed a veto. Interest rates for federally subsidized Stafford loans will double to 6.8 percent on July 1 if Congress does not act, and both President Obama and Congressional Republicans had originally said they favored a long-term solution. But Congressional Democrats have opposed the House Republicans' plan, which would create interest rates based on 10-year Treasury bonds that would vary over the life of the loan, and want to sustain the 3.4 percent interest rate for another year or two so that Congress can consider the interest rate in the context of the broader renewal of the Higher Education Act.
The Obama administration had originally proposed a market-based solution of its own: as in the House Republican plan, rates would vary from year to year with interest rates in the broader economy. But, once a loan was issued, the interest rates would be fixed over the life of the loan. In a statement Thursday night, Education Secretary Arne Duncan suggested that the administration might support Democratic proposals to push the increase back. "Now is not the time to double interest rates on student loans, and we remain committed to working with Congress on a bipartisan approach to a long-term, fiscally sustainable solution that will help students and families afford higher education now and in the future," Duncan said. "Given the impending July 1 deadline, an extension that protects students against higher rates while Congress develops an alternative solution is another reasonable option."
The bill, H.R. 1911, passed by a vote of 221 to 198, largely along party lines.