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Obama Campaigns for Congressional Action on Student Loan Rates

By Roger Runningen
April 21, 2012 6:00 AM EDT 19 Comments
Obama Presses Case to Freeze College Loan Interest Rate
Obama Presses Case to Freeze College Loan Interest Rate

President Barack Obama is pressing Congress to freeze interest rates on U.S. student loans, putting the spotlight on an issue with appeal to the middle-income and younger voters who are crucial to his re-election strategy.

Interest rates on federally-subsidized Stafford loans are scheduled to increase to 6.8 percent on July 1 from 3.4 percent. The rate increase would affect about 7.4 million students, according to the White House.

“In America, higher education cannot be a luxury,” Obama said in his weekly radio address. “It’s an economic imperative that every family must be able to afford.”

The president proposed Congress act to freeze the rates in his fiscal 2013 budget. The Congressional Budget Office estimates the one-year freeze would cost $6 billion.

Obama will lobby for action in front of college audiences in the battleground states of North Carolina, Iowa and Colorado next week. He will also make an April 24 appearance on the NBC television program “Late Night With Jimmy Fallon” to reach a wider audience of young voters.

Obama has framed his re-election message to highlight differences with Republicans on budget priorities. Over the past month, he has talked about his plans to maintain federal support for education, infrastructure and development of alternative energy while accusing his opponents of sacrificing those programs to provide tax cuts for top earners.

November Election

The president’s political advisers have said they expect a close race against presumptive Republican nominee Mitt Romney, the former governor of Massachusetts.

In the 2008 election, voters in the 18-24 age group supported Obama 66 percent to 32 percent for Republican presidential nominee John McCain, national exit polls showed.

White House press secretary Jay Carney said yesterday Obama’s two-day trip next week is for “official events” to talk about policy rather than politics.

If the president were to stay out of battleground states in an election year, “he would be severely restricting his ability to go to big parts of the country,” Carney said.

Obama said in his radio address that keeping student loan rates low is “a question of values.”

“We’ve got to build an economy where everyone gets a fair shot, everyone does their fair share and everyone plays by the same set of rules,” Obama said, repeating a theme that has been a part of his speeches this year.

Republicans Respond

In the weekly Republican radio address, Senator Roy Blunt of Missouri said rising energy costs are a more immediate concern for voters.

“If we’re going to talk about economic fairness, or about fairness, one of the most pressing economic issues facing families, seniors and job creators in Missouri and across America is the strain of skyrocketing gas prices,” Blunt said.

The average cost of tuition and fees at a public, four-year college has almost tripled since the 1995-1996 academic year and has more than doubled for a private school education, according to data from the College Board, a New York-based nonprofit group whose members include universities.

Educational-loan debt has ballooned to $1 trillion, surpassing the amount owed on credit cards in the U.S., according to the Consumer Financial Protection Bureau.

“We have an immediate crisis,” Education Secretary Arne Duncan said at yesterday’s White House briefing. “College has to be affordable for the middle class and for people who aspire to be middle class.”

Options on Cost

U.S. Representative John Kline, chairman of the House Education and Workforce Committee, said “lofty campaign promises” have put lawmakers in a bind.

“We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers,” the Minnesota Republican said in a statement. “I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run.”

Kline said House lawmakers are “exploring options” that would pay for the $6 billion in costs in a way that “serves borrowers and taxpayers equally well.”

Undergraduates can utilize two types of Stafford federal loans based on their families’ ability to pay for college. With subsidized loans, the government pays the interest while the student is in school and for a six-month grace period after graduation. For this academic year, the rate for that loan is 3.4 percent, and would double on July 1 unless Congress acts.

There is no income requirement for unsubsidized loans, where students pay the interest during school or it accrues. The rate is 6.8 percent.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net

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