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California Association of Private Postsecondary Schools

Students look for Obama's help as deadline looms on college loan rate hike

04/01/2013

THE HILL. MARCH 31, 2013.  Democrats and student advocates are looking for President Obama to rejoin their fight to prevent college loan interest rates from doubling this summer — hoping he’ll again embrace an issue that was a political winner for him in 2012.

The hunt for Obama’s help comes with interest rates set to jump on July 1 — barring intervention by Congress — for a category of government student loans that millions of students rely upon.

Lawmakers agreed to extend the lower rates one year ago after Obama, in the midst of a heated presidential campaign, seized on congressional inaction as a way to bolster support among young voters.

But in absence of a campaign spotlight this year, the extension push is more subdued.

Advocates urging another extension say they’re hopeful Obama’s April 10 budget will includes a plan to hold the line on rates once again.

“Congress is a bit more muted,” said Chris Lindstrom, higher education program director for the left-leaning U.S. Public Interest Research Group (PIRG).

“The president said last year he wanted a more permanent solution, and so the budget would be the place where the blueprint for that exists. I think folks are waiting to see the details.”

Rep. Joe Courtney (D-Conn.), who sponsored legislation in 2012 to avoid the rate hike and plans to do so again, said he was confident the White House would be pressing the issue as the deadline approaches.

Courtney spoke with the administration earlier this month about the threat of a big interest rate hike.

“They don’t talk to me about a lot of other issues, so the fact that they took the time to meet and check in shows that they are very mindful that this is a huge issue,” he said.

“I do think you’re going to see this now become a White House position that is going to become more public.”

The White House is holding tight to the details of its 2014 budget proposal, but previous editions included sections devoted to lower rates.

And Obama has said in the past he wants to more comprehensively address borrowing for higher education.

But if the White House is going to push to continue lower rates for new students, it won’t have a lot of company in other budget plans.

The House Republican budget allows rates to climb as part of its effort to balance the budget in a decade.

And while Senate Democrats supported the lower rates in their budget, they did not set aside funds to address the issue.

The spiking rates would only apply to new subsidized Stafford student loans taken out by students entering college.

Roughly 7.5 million students took advantage of such loans in the 2010-2011 academic year, out of 36 million federal student loan borrowers overall, according to the Department of Education.

Subsidized Stafford loans, in which the government covers interest costs during college years and early deferment, are given based on financial need.

Last summer, the president seized on the rate-hike deadline as campaign fodder. He launched a mini-tour of three swing state college campuses to hammer the need to avoid a rate hike.

The White House even used Twitter, encouraging followers to employ the #DontDoubleMyRate hashtag to spread the word. The president also mentioned the issue in his 2012 State of the Union address, urging Congress to act.

The White House liked the policy, but the politics were appealing as well.

Both Democrats and Republicans were duking it out for the support of young voters, and Obama put his challenger, Mitt Romney, on his heels with the initiative.

Romney eventually joined the president in calling for an extension of lower rates, and Congress obliged two days before the deadline.

Now the issue is rearing its head yet again.

“Of course, whether or not there’s an election plays into their decision,” said Lindstrom.

“The White House knows that young people turned out in force [in the election] and certainly would be wise to consider that, regardless of whether or not there were an election.”

While interested parties wait on the White House, congressional committees are beginning to dig into the issue.

The House Education and Workforce Committee held a hearing on federal student loan programs earlier this month.  The Senate Health, Education, Labor and Pensions (HELP) Committee will be exploring the matter at an April hearing.

Both parties are eyeing comprehensive changes to the nation’s higher education system, including borrowing, but the looming deadline suggests a narrowed approach will be needed in the short run.

On the House panel, Republicans agree with Democrats on the need to prevent the rates from doubling, especially as borrowing rates in the overall economy remain so low.

At the same time, they are calling for another approach to setting student loan rates that would more closely follow borrowing rates in financial markets.

Republicans signed on to the one-year extension in 2012, but are making clear they are interested in a different approach this time around.

“No one wants to see student loan interest rates increase,” said Rep. John Kline (R-Minn.), chairman of the panel.

“When Congress approved legislation to temporarily stave off the Stafford Loan interest rate increase, my colleagues and I lent our support with the promise that we would use this time to work toward a long-term solution that better aligns interest rates with the free market.”

Meanwhile, Sen. Tom Harkin (D-Iowa), who chairs the HELP Committee, has yet to endorse a specific approach.

A spokesman for Sen. Jack Reed (D-R.I.), who advocated an extension in 2012, said the lawmaker was huddling with Harkin on the matter this time around.

Courtney said he was also working with Reed on another extension bill.

But Democrats pushing another straight extension will need to come up with roughly $6 billion in offsets to cover costs. If they can find a mutually agreeable offset, leading Republicans have indicated it will be considered.

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, signaled his potential support when pressed by Courtney on the issue on the House floor earlier this month.

“If we bring legislation to the floor that is paid for to deal with it like we did last year,” Ryan said, “I would assume we have every reason to believe that we'll pass it.”