What's really significant about the president's proposal is that for the first time it would tie student loan rates to market-based rates. Previously these rates were set by Congress. What the president is proposing is to use the 10-year Treasury note yield as sort of a basis for calculating these other loan rates. So the subsidized Stafford loan would be about 1 percentage point above that market rate. The nonsubsidized Stafford would be 3 points above, and the Parent PLUS loan would be 4 points above. So for the first time these student loan rates would be more in sync with overall interest-rate movements.
The response to people in the president's proposal is that the income-based repayment structure would be broadened, so that students would not be required to pay more than 10% of their discretionary income in a given year to repay these loans, and then there would be a 20-year cap as long as people stay good on their loan repayments. So the argument is that that would have sort of an effect to reduce the impact of potentially higher rates. But it's an interesting argument back and forth. Tying these loan rates to the market does have Republican support, so it's a case where the president and the Republicans are on the same side. So it would seem to give this proposal some legs of possibly happening.
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