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Obama urges Congress to prevent student loan rates hike


12:02, June 01, 2013

U.S. President Barack Obama makes a statement on student loans in the Rose Garden of the White House in Washington, D.C. on May 31, 2013. Obama called on Congress to help keep college affordable for middle-class families and students by preventing student loan interest rates from doubling on July 1. (Xinhua/Fang Zhe)

WASHINGTON, May 31 (Xinhua) -- U.S. President Barack Obama on Friday urged Congress to prevent the student loan rates from hiking which is due to occur on July 1, picking a fight with Republicans over the same problem both sides have been trying to solve with different answers.

Flanked by a group of college students, Obama delivered his remarks at the Rose Garden in the White House, calling for reserving higher education in the country as "the best investment" for young people and the nation's future.

Obama noted that the burden of student loans will restrict access to higher education.

"And that doesn't just hold back our young graduates, it holds back our entire middle class because Americans now owe more on our student loans than we do on our credit cards. And those payments can last for years, even decades, which means that young people are putting off buying their first car or their first house, the things that grow our economy and create new jobs," said the president.

The interest rates on new federally subsidized student loans will double on July 1 from 3.4 percent, a temporary rate reduction that was enacted in 2007. A last-minute approval by U.S. Congress in June, 2012 has extended the subsidized interest rates for a year.

"Now, the House of Representatives has already passed a student loan bill, and I'm glad that they took action, but unfortunately their bill does not meet that test. It fails to lock in low rates for students next year," said Obama.

Last week, the Republican-controlled House of Representatives passed a market-based Republican bill that would permanently link federal student loan interest rates to government interest rates, defying a veto threat from Obama.

The bill creates a permanent fix by setting student loan interest rates at a level equal to the 10-year Treasury note rate, plus 2.5 percent. Rates would be reset every year and be capped at 8.5 percent.

But Democrats argued that the bill would actually allow the rates to rise above 6.8 percent in the coming years and would create a variable loan rate system for students, which means they could be forced to pay higher rates on old loans.

The passage of the bill has set up a June fight between Republicans and Democrats over how to solve the problem.

Under Obama's plan, loan rates would equal the 10-year Treasury note rate, plus 0.9 percent, but did not include a cap on rates. Obama's plan also calls for a rate that is fixed for the life of the loan, instead of the variable rate.

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