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Student loan interest rates rise; Congress punts until after July 4th break

Congress on Friday failed to extend the low interest rate on federal student loans, meaning that rates on Monday are doubling from 3.4 percent to 6.8 percent. Lawmakers are expected to return from their July 4th recess next week to potentially retroactively extend the lower rate for another year; in the meantime, they kept up the blame game on Monday.

"Today, student loan rates will increase simply because Senate Democrats failed to act," House Majority Leader Eric Cantor, R-Va., said in a statement, pointing out that the GOP-led House passed a bill to extend the rate.

Democrats, meanwhile, argued the House bill amounted to a plan for the GOP to "profit off students."

While both sides seem to be in favor of lower rates, the disagreement essentially comes down to whether or not to tie the interest rate to financial markets. The House Republican bill would use market-based rates, which the nonpartisan Congressional Budget Office projects could save the government $3.7 billion over 10 years. Congressional Democrats, however, point out that students would likely pay higher and higher rates.

The rate hike, if it goes into effect, would impact the seven million people who will take out a loan this year, not those who already have student loans. According to CBS News analyst Mellody Hobson, a higher rate could have a noticeable impact on the economy. Debt takes a toll in various ways; for instance, someone with student loan debt is 36 percent less likely to own a home.

The Democratic-led Senate suggests they'll pass a bill to retroactively extend the 3.4 percent rate next week, on July 10. The White House expressed confidence Monday that the Senate would get it done.

"The Senate is working hard to prevent student loan rates from doubling, and will take action in the next few weeks to fix this problem," White House spokesman Matt Lehrich said in a statement. "We are confident they will get there, and that the solution will include retroactive protection for students who borrow after July 1st so that their student loan rates don't double."