THE CHRONICLE OF HIGHER EDUCATION. MAY 22, 2013. President Obama promised on Wednesday to veto legislation, currently pending in the Republican-controlled House of Representatives, that would prevent interest rates from doubling on some federal student loans by switching to a market-based formula for setting the rates.
The bill, HR 1911, was approved last week, on a largely party-line vote, by the House education committee. Sponsors of the bill, including the panel’s chairman, Rep. John P. Kline Jr. of Minnesota, described the measure as a rare opportunity for bipartisanship because it paralleled Mr. Obama’s proposal, in his budget plan for the 2014 fiscal year, to switch to market-based rates.
But in an announcement on Wednesday, the White House objected to the bill on several grounds, as “the wrong approach.” Unlike Mr. Obama’s proposal, in which an interest rate would be set for the life of each loan, the legislation “would not guarantee low rates.” Interest rates would be reset annually (although they would be capped), an approach that would “create uncertainty and lessen transparency” for students and their families, the White House said, and would particularly hurt low- and middle-income families struggling to finance a college education.
The White House statement also said Mr. Obama objected to the House plan because it would not allow all borrowers to take advantage of new repayment options and because it would use any money saved to reduce the federal budget deficit.
The Republican-backed legislation is expected to be approved by the full House, but its prospects in the Democrat-controlled Senate, where other bills are pending, are dimmer.