(MoneyWatch) President Barack Obama took to the Rose Garden today to urge Congress to stave off an increase in student loan rates now scheduled to occur on July 1.
"We know that the surest path to the middle class is some form of higher education," Obama said. He said Americans now owe more on student loans than on credit cards. He said he and his wife just finally paid off their loans in the last decade and paid more on them than they did on their mortgage.
"We were lucky. We had more resources than many," Obama said. He said the debt is forcing some young people to delay buying cars and houses, which can hurt the economy overall.
Earlier this week the president threatened to veto a student loan bill passed by the Republican-dominated House of Representatives. Although the White House and GOP have attacked each other's plans for dealing with American student loan debt, which now exceeds $1 trillion, their solutions appear to have much in common.
The GOP plan would determine interest rates on new federal student loans in relation to the government's borrowing costs and allow them to vary annually.
The plan would require each subsidized and unsubsidized Stafford loan to be recalculated every year and pegged to 10-year Treasury notes, plus 2.5 percentage points. It also caps Stafford loan rates at 8.5 percent. The White House has said this would create uncertainty for families and require them to pay more when market rates go up.
At today's rates new loans would carry a 4.5 percent interest rate. The rate for subsidized Stafford loans would increase from the current fixed rate of 3.4 percent to 4.5 percent. The bill would cap interest rates at 8.5 percent for undergraduates and 10.5 percent for graduates and parents.
The rates for the new Plus student loans for graduate students and parents would be 4.5 percentage points above the 10-year Treasury yield. Under today's rates interest would be about 6.5 percent, 1.4 percentage points below the current rate.
The president's plan would also set the rate on federal student loans each year based on the market rate, but it would remain fixed for the life of the loan. His plan doesn't cap how high interest rates could go, so it appears to have some of the same faults as the GOP plan.
There is a move in the Democratic-led Senate to maintain the current interest rates of 3.4 percent for another two years
A report by the nonpartisan Congressional Research Service estimates that under the Republican plan, a student borrowing the maximum amount of subsidized and unsubsidized Stafford loans over five years would pay $14,430 in interest. If rates were allowed to double on July 1, a student would pay $12,598, compared with $7,965 if rates do not double.
The Associated Press contributed to this report.