Student loans 101: What's at stake in D.C. feud over college loan subsidy?

Interest rates are set to double on certain federal student loans, if Congress and President Obama don't agree on a fix by July 1. Who would be affected? How did we get here in the first place? Here are answers to five key questions.

4. Why is the rate set to double on July 1?

Susan Walsh/AP
President Obama greets students after he called on Congress to stop interest rates on student loans from doubling next month during a news conference in the East Room of the White House in Washington on June 21, 2012.

The 3.4 percent rate is a result of the College Cost Reduction and Access Act passed by Congress in 2007. That law reduced the rate yearly – from 6.8 percent in 2007-08 to 6 percent, then 5.6 percent, 4.5 percent, and finally 3.4 percent in 2011-12. The law also set the rate to return to 6.8 percent in 2012-13.

Democrats who came into power in 2007 “had campaigned on a promise to cut interest rates in half on student loans. That proved to be a very, very expensive promise,” Delisle says. “So they put in a lot of fine print to limit who gets [the lower rate] and when.”

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