Federally Backed Student Loan Interest Rates Set to Double on July 1 to 6.8%

Federally backed student loan interest rates are set  to double  from 3.4 percent to 6.8 percent on July 1, reports The Hill.

To stop the hike, the House today passed a Republican bill that would permanently peg federal student loan interest rates to government interest rates, reports TH.

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

Democrats argued that the bill would actually force many students to pay more in interest payments, based on the GOP formula.

TH says, President Obama has also proposed basing interest rates on the 10-year Treasury note. But this week, Obama said there are enough differences between his plan and the GOP bill to warrant a veto threat.

Under Obama's plan, loan rates would equal the 10-year rate plus 0.9 percent, not the 2.5 percent in the GOP bill, although Obama's plan did not include a cap on rates. Additionally, Obama's plan calls for a rate that is fixed for the life of the loan, not the variable rate Republicans offered.

Best solution: Take Gary North's advice and never pay retail for a college education.