In just a few days, seven million people will see their student-loan interest rates double. Plenty in the Senate are talking about finding a solution, but they will almost undoubtedly fail. The question is not whether or not rates will go up; the question is, whose fault is it? And Republicans in both chambers are optimistic that the answer to that question will be, not theirs.
Inside Higher Ed has a helpful explanation of why all this is happening:
Last year, the interest rate on newly issued subsidized Stafford student loans — loans that are available only to students with financial need, and that don’t accumulate interest while students are enrolled in college — was scheduled to double to 6.8 percent on July 1. The increase was long foreseen: Congress passed legislation in 2007 that gradually lowered the interest rate from 6.8 percent to 3.4 percent over five years, but the rate was scheduled to rebound in 2012.
But as concern grew about student debt during last year’s presidential campaign, student groups and the Obama campaign successfully persuaded Congress to pass a one-year extension of the 3.4 percent interest rate, a historic low, at a cost of $6 billion.
Now, though, the year is up, and the interest rate on newly issued subsidized loans will double on July 1 if Congress doesn’t act.
And the consensus seems to be that Congress won’t, at least not before the July 1 deadline. The rate hike will probably cost between $6 and $33 per month for most. House Republicans passed a provision in May that would prevent the rate hike by tying rates to ten-year Treasury rates. Said rates could fluctuate up to a certain cap (8.5 percent or 10.5 percent, depending on the loan). The president’s budget included a proposal that also tied rates to ten-year Treasury rates, but would let students lock in their rate. It’s a little more complex than that, so read the Higher Ed piece if you want more detail. In short, both plans take a market-based approach instead of letting Congress set rates.
Anyway, the White House tipped its hat to the House for actually passing something but said the lower chamber’s solution was unacceptable. The Senate, however, has yet to pass anything, and that highlights a rift between the upper chamber’s Democrats and their party’s leader. Miles Graham reported for Time, “Democratic operatives are expressing frustration about the White House decision to threaten a veto on a House bill that, at least in broad strokes, follows Obama’s own prescriptions.”
In fact, Senate Republicans introduced a proposal that Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, described as identical to the president’s — and it didn’t pass. So Republicans don’t see it as much of a stretch to characterize Senate Democrats as obstructionists.
“Senate Republicans brought up, word-for-word, the president’s plan, and Senate Democrats shot them down,” says Doug Heye, a spokesman for House Majority Leader Eric Cantor. “The only thing preventing this from going to the president’s desk so he can sign it into law is action from Senate Democrats.”
Another GOP aide concurred.
“I think that people nearly universally point to Democrats as a big reason why the deadline will come and go without a solution,” he said. “And they can try to explain their way out of it, but they’re gonna be doing a lot of explaining. Republicans have passed a bill. Republicans have proposed things in the Senate that are very reasonable. Democrats are in the position where they have to defensively explain, and, in this business, when you’re explaining, you’re losing.”
Stewart says he doesn’t see any way to blame Republicans for the imminent rate hike.
“We’re the ones who are trying to get it done,” he says. “Democrats have just decided that they wanted to block this thing, despite the president calling for a reform. They’re sticking to their what Secretary Arne Duncan called ‘kicking the can down the curb’ approach. I’m not sure what that means.”