In an attempt to subside theÂ treacherous effects of student debt, the White House is expected to propose that student loan interest rates be based on the market and not by a fixed rate, presently determined by Congress.
To be sure, the Government is making billions of dollars off of student debt, which sits at a mounting $1.1 trillion. But many student advocates, policy makers, and legislators are rolling out concerns with the overall economic dangers posed by increased student debt. Some have warned that student debt is holding back the economy and risks hurting future credit creation.
“A specific fixed interest rate should not be cited in legislation or in regulation, because such a rate could soon become outdated,” said a statement released by the White House Office of Management and Budget.
In January, the OMB said that because federal student loan interest rates do not move with markets, there may be potential costs to the government and general economy.