Instead of politicians determining interest rates on subsidized Stafford college loans, a new student loan bill approved on Thursday by the U.S. House of Representatives will link interest rates to the market.
Backed by the GOP, the student loan bill was opposed by Senate Democrats and Obama issued a veto threat, reported USA Today.
According to Washington Post, the law must change by July 1 or interest rates will go from 3.4 percent to 6.8 percent.
The Wall Street Journal reported that the bill will not affect current rates on existing loans, but would affect loan rates made after June 30.
The new student loan bill will reset every year based on 10-year Treasury note, causing students to pay the Treasury rate along with 2.5 percentage points, according to Newser.
Education Committee Chair John Kline, author of the student loan bill, said in a statement that he wanted to ease political battles in Congress about setting an interest rate on student loans.
“We need a long-term solution to get us out of these annual, bi-annual, semi-annual political battles," John Kline told USA Today. "We want to help students and we want to give them certainty and we want them no to have to rely on the whims of politicians here.”
Rep. Mark Takano, a Democrat from California opposed to the Republican bill saying, “I'm not really thrilled with the Republican plan, which would make student loan interest rates a variable interest rate and could rise above 6.8 percent, which is what the interest rate would rise to if Congress did nothing.”
The bill calls for an 8.5 percent cap, according to USA Today, while Obama’s initial plan would have a set interest rate and added flexibility on loan payments for students.