Obama’s Proposed Budget Seeks to Prevent Doubling of Student Loan Interest Rate
The Obama Administration's budget request to Congress for fiscal year 2013 includes several proposals related to student loans. In the proposed budget, the President recommends extending the 3.4% interest rate on undergraduate Subsidized Stafford student loans for one year, preventing the interest rate from doubling to 6.8 % on July 1.
The budget further proposes eliminating the interest subsidy for borrowers who remain in-school beyond 150 percent of their program length. The administration estimates that this would save $1.8 billion over ten years that will be used to help fund Pell Grants.
Also, the budget includes changes to the way student loan guarantee agencies get paid when they "rehabilitate" defaulted loans. The proposal is to eliminate their current retention share of the original defaulted student loan amount, and reduce to 16 percent the fee they can charge a borrower on outstanding balances. These changes are estimated to save $3.4 billion over 10 years.
Want to read more? Check out the Department of Education's Summary and Background Information regarding the fiscal year 2013 budget request. Prefer moving pictures? The National Association of Student Financial Aid Administrators (NASFAA) has posted a clip of the Director of the White House's Domestic Policy Council Cecilia Munoz summarizing the budget's higher education proposals.
