The question of what to do about the scheduled upcoming increase in the rate of interest increase on Stafford loans for college grads is getting heated. Technically, it isn’t an increase from 3.4% to 6.8% but merely a reversion to the proper interest rate after the lapse of an agreed subsidy period. That, however, isn’t how the ‘increase’ is popularly perceived and in an election year, and the issue has become a political hot potato. Romney recently came out in favor of extending the federal subsidy, against the ideological beliefs of many in the Republican party, in what many believe to be a political move to head off the risk of President Obama automatically capturing the student and graduate vote.
Now House Republicans have passed legislation agreeing to the extension of the federal subsidy – paid for with funds from healthcare. The vote was won 215 to 195 and had almost no bipartisan support. The White House has already declared their intention to veto the bill.
“This is a politically motivated proposal and not the serious response that the problem facing America’s college students deserves,” the White House said, noting that hundreds of thousands of screenings for breast and cervical cancer are available through the health fund.
Democrats in the Senate have proposed funding the extension through a tax increase on higher income households. If Congress cannot come to an agreement then loan rates are scheduled to revert to 6.8% on July 1 for 7 million college students. However it seems increasingly likely that the two sides will eventually find a compromise funding solution and the issue of federally subsidized student loans will again be kicked forward to the next election cycle.
The presumptive GOP presidential nominee, Mitt Romney, supports keeping the rates low, and Boehner, leveling some of his harshest attacks yet on the White House, suggested Obama had engineered a “fake fight” as the president toured college campuses this week to rally support for the lower interest rates.
“It’s a simple as this: Republicans are acting to help college students and the president is now getting in the way,” said Boehner spokesman Michael Steel.
A Stafford loan is a student loan offered to eligible students of accredited US higher education institutions to help finance their education. The current cost of the federal subsidy is estimated to be $6 billion a year.