In a political environment that has seen growing conflict between Republican opposition and President Barack Obama — from the September 11, 2012 Benghazi terrorism scandal to last week’s revelation that the IRS targeted Conservative non-profits for special scrutiny — Republicans have signed on to the Obama administration’s plan to keep student loan interest rates from going up.
Philip Elliot writes for the Associated Press that this “rare win” for Obama depends on the GOP-led Education and Workforce Committee’s endorsement of a plan that would tie student loan interest rates to market rates. As student loan rates are set to double on July 1, this will provide significant relief for borrowers.
But there’s more to the plan including an adjustment of subsidized and unsubsidized loan rates as Republican John Kline has brought forth:
Kline’s proposal also would end different interest rates for subsidized and unsubsidized undergraduate loans. Both would pay the same rates, which would be linked to 10-year Treasury notes.
There is popular confusion about student loan interest rates ‘doubling.’ In December, 2007 Congress lowered student loan interest rates to 3.4% in the beginning of the United States’ economic recession. That rate is set to return to its previous level of 6.8% in July, 2013 — which doubles a rate that was halved.
Both Democrats and Republicans have proposed a plan that would tie interest rates to the market rather than setting a hard value independent of the financial sector’s ebbs and flows. It’s a double-edged sword, though; as the US Treasury increases its rates, variable student loan rates would rise, too.
Rep. George Miller, a frequent player in education policy and the ranking Democrat on the Education and Workforce Committee, isn’t sold:
“This is just another classic bait-and-switch scheme: lure you in with a short-term lower rate but then charge you higher rates in the long-term. A lot more,” said Rep. George Miller, the top Democrat on the House Education and Workforce Committee.
According to the US Department of Education, there are ~36 million borrowers with student loans, with individual student debt averaging ~$26,000 and the nation’s combined student loan debt topping $1 trillion — a total that has for the first time overtaken consumer credit card debt.
Proposals will be analyzed and discussed by the Committee some time next week and a vote is expected shortly after.
Kline, a Republican Representative from Minnesota who has served since 2003, is pleased to find common ground with the Obama administration and Democrats:
“This coming up with a market-based student loan interest rate for the long term, I like it. I am very happy for the president on this one.”