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Obama Student Loan Proposal Puts Future Students At Risk: No Cap on Variable Rate Leaves Students Vulnerable to High Interest

April 10, 2013
Rae Roca

Obama Student Loan Proposal Puts Future Students At Risk:
No Cap on Variable Rate Leaves Students Vulnerable to High Interest

A Joint Statement on the President’s Proposed Budget

If Congress takes no action, interest rates will double on July 1st from 3.4% to 6.8% for subsidized Stafford loans, which more than 7 million college students rely on to attend school.  Last year, Congress came together and found a bipartisan solution to keep rates at 3.4% for one year. Below is a joint statement by NCLC, Our Time, Rock the Vote, Roosevelt Institute Campus Network, Student Debt Crisis, US PIRG, and Young Invincibles on the changes proposed in the President’s budget to deal with the interest rates going forward.

[Washington, DC] While the President’s budget keeps rates low in the near term, we’re disappointed that it risks sky-high interest rates in the long term. The structure of the proposal switches student loan interest rates from a fixed rate to a rate that varies with the market, allowing students to take advantage of temporarily low rates, but offering no protection for students when rates inevitably begin to climb. Without a cap, this proposal falls far short of the comprehensive reform to student loans that we need.

The Administration takes steps in the right direction by improving Income Based Repayment so that all federal borrowers can pay back their loans at no more than 10 percent of their income. However, Americans now hold over $1 trillion dollars in student debt, and we need a solution that keeps rates affordable without the risk of spiking the cost of college for future generations. Students have never taken out federal student loans without a cap on how high interest can go. The President stood with us by investing in higher education during his first term, and we’re concerned that his budget does not deliver the same investment this time around.

Young Americans know that the President must work to get our fiscal house in order. In his first term, the President showed a great deal of leadership on making college affordable. Going forward, it will take a broad package of reforms of which interest rate changes are a part to stem the tide of college costs. We look forward to working with the President on a more tenable solution to keep rates low, be it a long-term solution that actually protects future borrowers, or a short-term action that allows time to develop a long term plan.


Young Invincibles is a national organization committed to amplifying the voices of young Americans, ages 18 to 34, and expanding economic opportunity for our generation. Young Invincibles ensures that young Americas are represented in today’s most pressing societal debates through cutting-edge policy research and analysis, and innovative campaigns designed to educate, inform and mobilize our generation to change the status quo.