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Student Loan Rates Set to Double

(CNN) — Surrounded by college students in the rose garden, President Obama said higher education is the key to building the middle class.

“You’re going to need more than just a high school education to succeed in this economy,” President Obama said.

But he warned a college education may soon be out of reach for some Americans. Unless Congress acts, interest rates on new federal student loans are set to double on July 1, rising to 6.8 percent. The president said that would mean an additional thousand dollars of debt per year for the average student.

“It’s like a thousand-dollar tax hike. I assume most of you can’t afford that,” President Obama said.

About seven million students taking out federal loans for the next school year will be affected. The House passed a bill addressing the issue last week, but the president said it doesn’t go far enough.

“It fails to lock in low rates for students next year. That’s not smart. It eliminates safeguards for lower income families. That’s not fair,” President Obama said.

He’s calling on students to reach out to their members of Congress.

Senate Minority Leader Mitch McConnell says Republican senators have proposed a solution. He slammed the president for holding a “campaign-style” event. in a statement he said:

“The President appears more interested in needlessly stoking partisan divisions in Washington than helping young Americans avoid a higher interest rate on their student loans.”

Both sides agree the increase would hurt students, but so far they’ve found no common ground to keep higher education from coming at a higher cost.

Senate Majority Leader Harry Reid says the Senate will vote next week on a bill to extend the current loan rates for two years. One of the differences between the two sides focuses on maximum interest rates. The Republican-controlled House measure would cap student loan interest rates at 8.5 percent.

President Obama’s plan has no cap, but it does limit a student’s annual loan payments to no more than 10 percent of discretionary income.

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