WASHINGTON -- As the days tick down until the rates on subsidized student loans will double to 6.8 percent on June 1, Senator Elizabeth Warren, a Massachusetts Democrat, proposed a bill that would set the interest rate for federally subsidized student loans at the same rate as the Federal Reserve's discount rate to banks -- currently 0.75 percent. The rate would be good for one year, to give Congress time to come up with a long-term fix. The loans would be funded by the Federal Reserve.
Congressional Republicans and President Obama have called for a market-based interest rate based on the government's cost to borrow, but the interest rate from those solutions would be a few percentage points higher than Warren's proposed 0.75 percent.
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