Heard your student-loan interest rates are going up? Blame the Democrats.
That’s the message House Republicans are pushing aggressively these days, pointing out that they passed back in May a measure that would have prevented the increase in federally subsidized student-loan interest rates that happened on July 1. Stafford student loans — the most common type of federal student loans — had had an interest rate of 3.4 percent. Now, the interest rate on new loans is 6.8 percent.
The plan the House GOP passed would set interest rates at about 4.4 percent for the next year. In contrast, the Senate hasn’t passed anything — even though the hike went into effect eight days ago.
“The White House and Senate Democrats have let these students down,” House speaker John Boehner said at a press conference yesterday on the steps of the Capitol. He stood behind a podium emblazoned with the “#dontdoublemyrate” hashtag that President Obama had so effectively deployed last year to urge young adults to support a freezing of the 3.4 percent rate. House Republicans helped pass that extension last year, but this year they’re determined to move the interest rates from whatever number Congress likes in a given year to a market-based formula.
Flanked by dozens of college students, the women in pearls and heels and the men in jackets and ties, Boehner said, “The House has done its job. It’s time for the Senate and the White House to do its job.”
Representative Cathy McMorris Rogers, House Republican conference chair, struck a similar tone, saying, “When Senate majority leader Harry Reid tells us that he’s not looking for a compromise, I would encourage him to think about . . . these college students, think about millions of others across the country.”
“As members of Congress,” she said, “we’re here to make life easier for students that want to go to college.”
After setting the rate at 4.4 percent this year, the House legislation would gradually transition to a flexible system, with the rate for Stafford loans issued in a given year being the ten-year Treasury-bond rate (currently about 2.6 percent) plus 2.5 percentage points. The rate would be capped at 8.5 percent.
But on the Senate side, Republicans don’t think the House legislation has any chance of passing the Democrat-run Senate. Instead, according to a Senate GOP leadership aide, Senate Republicans will push a different (and bipartisan) bill introduced by Senators Lamar Alexander (R., Tenn.), Tom Coburn (R., Okla.), Richard Burr (R., N.C.), Joe Manchin (D., W.V.), and Angus King (I., Maine). In their bill, Stafford loan interest rates would be ten-year Treasury rates plus 1.85 percentage points, and there would be no cap on how high interest rates could climb. If implemented right now, this bill would lead to an interest rate of about 3.7 percent. A House GOP leadership aide had no comment on whether that bill would be acceptable to the House, but Representative John Kline (R., Minn.), chairman of the Health, Education, Labor and Pensions Committee, supports it, according to his office.
Whatever the final outcome, Republicans’ attention to the issue seems like a smart play. Relatively low interest rates won’t eliminate the burden students are taking on, but student loans are a top priority for young voters — a solid majority of whom currently vote Democrat. A June report by the national College Republicans about young voters found that in focus groups, young adults “did think that Democrats were responding to the student loan crisis.” One focus-group attendee even said, “Obama is helping us with our student loans. That was why he got my vote.”
In other words, make no mistake, the fight over student-loan rates issued in 2013 is a battle for votes cast in 2014 and 2016.