Obama Kicks Off Campaign to Stop Student Loan Spike

As another student-loan showdown gets underway, Republicans may be in better position to win the political skirmish.

  • Share
  • Read Later
MANDEL NGAN / AFP / Getty Images

President Barack Obama speaks on students loans on May 31, 2013 in the Rose Garden of the White House in Washington.

On July 1, more than 7 million college kids will see their federal student loan rates double unless Congress reaches a compromise to avert the looming hike. Given the recent track record of the legislative branch, that may not be a comforting proposition. But in this case history offers a glimmer of hope. A year ago, amid a tight presidential campaign, Barack Obama was able to use the presidential bully pulpit to pressure Congressional Republicans into postponing the planned rate spike for 12 months. Now, with federal subsidies again set to sunset in a month, Obama gathered a group of college kids in the sweltering Rose Garden Friday morning in a bid to force Republicans to bend. “If this sounds like deja vu all over again, that’s because it is,” Obama said. “We went through this, and eventually Congress listened to all the parents and young people who said, Don’t double my rate.”

But the same play may not work twice. It’s no longer campaign season, which means Republicans won’t be as concerned about broadsides claiming they’re trying to balance the budget on the backs on cash-strapped college kids. In fact, as another student-loan showdown gets underway, Republicans may be in better position to win the political skirmish.

That’s because the House GOP has already acted to forestall the rate spike. In late May House Republicans they passed a bill that would scrap the subsidized loan rate of 3.4 —set to spike to 6.8%—and instead peg the loans to the yield of 10-year Treasury notes.The move partly mirrors a plan put forth by President Obama, whose 2014 budget proposed to link the interest rates of federal loans to market trends.

The House GOP plan would set the rate for popular federal Stafford loans at 2.5% above the 10-year Treasury note, and allow the rate to fluctuate over each year of the repayment period. Obama prefers to charge a lower rate than Republicans—a little less than a point above the Treasury rate—fixed over the life of the loan. The President’s plan would not establish a cap on the maximum rates, while House Republicans set it at 8.5% for Stafford loans. The White House says a new student taking on the average college-loan burden of more than $26,000 would pay a few hundred dollars more under the GOP proposal than if the subsidies simply sunset as scheduled, while Obama’s proposal would save them $4,000 over the life of the loan.

Obama, who long ago decided that ginning up public pressure on his opponents works better than playing the inside game, is hoping to make the GOP cave on the issue for a second time. “I’m glad the House is paying attention to it, but they didn’t do it in the right away,” Obama said. “The House bill isn’t smart, and it’s not fair.”

The problem is that Senate Democrats have yet to pass a bill of their own. “We’re going to spend the week mocking him for attacking us to take up a bill we already passed,” says a House Republican leadership aide. “It’s Harry Reid he should be attacking.”

It’s not that Democrats don’t have proposals. One bill, proposed by Iowa Senator Tom Harkin and Rhode Island Senator Jack Reed, would freeze the current rate for two years to buy time for Congress to craft a sweeping solution to combat stratospheric college costs, which have nudged total student debt past the $1 trillion mark. The bill’s $8.3 billion price tag would be defrayed by closing choice tax loopholes, such as one for producers of tar-sands oil. Another proposal, submitted by Massachusetts Senator Elizabeth Warren, would cut loan rates for one year to the .75% that the Federal Reserve charges big banks at its “discount window.” The comparison, critics note, is inapt. Whereas the bank rate is for overnight lending, students taking on a 10-year loan are a riskier proposition. A pair of Brookings Institution scholars called Warren’s populist proposal a “cheap political gimmick.” Even if you disagree, it’s still just a temporary fix.

The similarities between the President’s proposal and that of House Republicans are significant enough that a solution should be achievable. But with Obama opting to campaign his way to a deal, and House Republicans arguing they’ve come far enough by taking up his market-based approach, a compromise is so far nowhere.

With reporting by Zeke Miller

49 comments
MarcusTaylor
MarcusTaylor

"Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all." - John Maynard Keynes 

While the GOP & Bankers insist on making large unreasonable profits on education, here is what our potential competitors/enemies are doing;

By 2030, China will have 200 million college graduates, more than the entire U.S. work force,” and by 2020 China plans to:Enroll 40 million children in preschool, a 50 percent increase from today.Provide 70 percent of children in China with three years of preschool.Graduate 95 percent of Chinese youths through nine years of compulsory education (that’s 165 million students, more than the U.S. labor force).Ensure that no child drops out of school for financial reasons.More than double enrollment in higher education.

By 2017, India will graduate 20 million people from high school, or five times as many as in the United States.”  Now when you compare these numbers to the fact that HALF THE ADULT POPULATION OF TEXAS DOES NOT HAVE A HIGH-SCHOOL DIPLOMA OR GED .... well, the Bush & Perry Governorships make sense. Why would any "sane person" limit the ability of their country to compete by making a profit off our future ? 


BorisIII
BorisIII

If it doesn't help the rich get richer then the Republicans will never pass it.

mrbomb13
mrbomb13

Republicans will hammer Obama on this issue.  The Democrats are powerless to stop them.

mydads1st
mydads1st

Student loan rates should be pegged to the same rate the banks for the money they borrow. Period! Those who vote against this should be removed form office. Higher rates play to the greed and excesses of the 1% and their notion that money is all that counts. The richest keep getting richer, the poor still strive to gain ground, there is a “concentration of wealth in the hands of fewer and fewer people and the concentration of power in stricter, less compassionate hands!" It is tantamount and important to remove these radical extremes from office! The 2014 Mid-term is a-coming! As is 2016, and 2018!

fitty_three
fitty_three

Looks to me students can be added to the list of demographics the GOP hates.

lextender
lextender

Stop whining. Since most students loans are supposed to be fully repaid in 12 years, Obama's plan will save the student $94.00 per year, or 25 cents per day, over the term of the loan.

LouAZ
LouAZ

The Student Loan Interest Rate should be the same interest rate that big Banks pay the Fed for their loans. Fair is fair !

IvanGorokhov
IvanGorokhov

Just give every US citizen 100 trillion dollars by the end of 2013! Think about all hungry children that will have 100 T dollars. They will finally have food and cry with happiness thanking the government. 

Noone will have to work anymore, US debt will be easily paid and every one of us can live in a mansion with multiple servants! 

Free money to everyone!


itowle88
itowle88

When the government gurantees everyone a college education, regardless of ability or future potential for repayment - AND put no limit on how much every student is allowed to borrow- you have written a blank check that colleges have been more than willing to cash out... As usual, liberal good intentions have distorted a marketplace and driven prices higher and quality lower... then scream at trivial issues like interest on these inflated loans..... when will you all learn........... or are these policies just to make yourself feel better.... to be able to still claim some kind of moral monopoly on rational thinkers....

curt3rd
curt3rd

You can put the interest rate anywhere you want, still no jobs when they get out of school.

commentonitall
commentonitall

The comparison, critics note, is inapt. Whereas the bank rate is for overnight lending, students taking on a 10-year loan are a riskier proposition.  No we are not and there is a very simple explanation.  There is no way to expunge the burden of a student loan debt.  Bankruptcy will not settle your student loans and still leaves you on the hook.  Nothing short of death with allow you to escape paying the loans back, therefore they are a very stable loan and more so than any other type of loan on the planet.  One way or another money will be paid back.  The federal government is being greedy.  They allow companies that pollute the environment and steal from the middle class to get tax breaks, but expect people trying to further themselves intellectually so they can be productive members of society to carry the burden.  It's so wrong and anyone with a single brain cell and see that.


deconstructiva
deconstructiva

Thanks, Alex. This post offers an interesting parallel to your earlier one today on immigration: the R's can only win (or minimize losses) here by actually getting something useful done. Of course, old-school Bob Dole GOP vs. Tea Party infighting may yet sabotage that. Just as Latinos would be further angered by GOP obstruction, enough college students could be (ticked) off enough to form a dangerous voting block. Think also about the parents who may have to shoulder more burden. What, kids don't get enough jobs to pay the bills? Who's hiring? So much for Mitt Romney's theory of borrowing more money from the parent, I guess. A natural follow up to this story is how college grads will pay the higher interest hikes ...provided they can find jobs at all to pay 'em. (Okay, doing the followup is really an excuse for you, Katy, etc. to hit college campuses and bars on TIME's expense tabs, but the topic is a valid one.)


mrbomb13
mrbomb13

Sorry, but Obamacare is an incorrect analogy for this issue.

Obamacare was rushed through both Democrat-controlled houses of Congress, and upheld by the Supreme Court.

With this College Loan issue, what Obama's proposing must first be passed in a Republican-controlled House of Representatives.  That will not be easy in a non-Election year, especially in light of the scandals rocking the White House.

mantisdragon91
mantisdragon91

@reallife @IvanGorokhov Funny thing about the USSR. The Politburo that ran the country has much in common with today's GOP. They too wanted to keep the bulk of the countries wealth for themselves and a small over class of connected individuals, while letting the rest of the country battle for the scraps.

MarcusTaylor
MarcusTaylor

@mrbomb13 In response to your comment concerning Obamacare ... it is already working for the common household ... and it is not yet fully implemented. The people who are opposed are just plain stupid.  I was at the VA Hospital in Pal Alto and my doctor and I were walking to the elevator when we passed two old veterans (Korea ?).  They were talking about how they were against Obama's "socialized health care plan". I looked at my doctor and said ... "do they know where they are?" , he stated that there was no use trying to convince them of anything ... their political compass required that they believe what their GOP Masters told them ... DEATH PANELS ?

fitty_three
fitty_three

@mrbomb13 

"Lastly, is there any evidence that the GOP risks getting impaled on this issue, especially with the public being distracted by all the scandals?"

Maybe that's why the GOP is trying to puff those up. None are all that, they're mostly hot GOP air.

And as far as the ACA goes, do you plan to ignore the fact that half of those disapproving of the ACA do it because it didn't go far enough?

Oh!  Did I mention that already?

mantisdragon91
mantisdragon91

@mrbomb13 Actually the public could care less about these scandals. 73% of the public wants the focus to be on the economy, which the GOP has done nothing to help with.

mrbomb13
mrbomb13

I'm sorry, but I've never heard the "eat their spinach" expression.  In my family, we had to eat whatever was put on our plate, so the notion of "children dictating the rules to the parents" is foreign to me, and indicative of weak parenting.  Apologies for being so literal.

Next, do you have any studies/statistics to show that, "Half of those opposed to the ACA are opposed because Obama didn't go far enough?"  The reason I ask is that over half of Americans are currently opposed to the ACA  (http://www.upi.com/blog/2013/05/30/Obamacare-starts-in-2014-more-than-half-of-Americans-oppose-it/2601369936906/).  Furthermore, more than half of the States in the country sued to have it stopped (http://www.newsmax.com/Murdock/healthcare-obamacare/2011/02/18/id/386576). 

Lastly, is there any evidence that the GOP risks getting impaled on this issue, especially with the public being distracted by all the scandals?  We'll just have to wait and see.

mrbomb13
mrbomb13

There will be no, "try."  The GOP will just 'do,' and Obama will have to find a way around them. 

Come 2014 Election time, if Obama gives 1,000 more campaign-esque speeeches, the GOP will surely match him  by recalling all of the scandals.

It won't be pretty for both sides, with the Lame Duck President and Congress having at it again.

fitty_three
fitty_three

@mrbomb13 

I agree with you that it's impossible to make spoiled children eat their spinach.

A word of caution on health care:

Half of those opposed to the ACA are opposed because Obama didn't go far enough.

It will be fun to watch the GOP Insane Klown posse impaled on this issue.

mantisdragon91
mantisdragon91

@mrbomb13 I hope the GOP does try to hold it hostage. The students and their parents will remind them of that come election time.

mantisdragon91
mantisdragon91

@IvanGorokhov @mantisdragon91 @reallife I was born in Kiev myself came here in 1978. Krushev and Stalin would have been right at home in this GOP with their desire to spend more on weapons less on people and oppress minorities and gays.

IvanGorokhov
IvanGorokhov

@mantisdragon91 @reallife @IvanGorokhov I was born in USSR and trust me - Obama is moving US in the same direction very fast. Hiding the truth, lying, destroying opposition with illegal cheap tricks, buying votes of lazy ones with free money they do not deserve. It is amazing to me how most people can not see where the country is going. Republicans are also corrupt, but they move US in opposite direction and more honest compared to Democrats. 

fitty_three
fitty_three

@IvanGorokhov 

I think you need to move back to Mother Russia and work on Mr. Putin.

Maybe you'll make more sense over there.

IvanGorokhov
IvanGorokhov

@mantisdragon91 @IvanGorokhov @fitty_three Obama happened. Bush took on debt for questionable wars. Obama took way more debt for what? For incompetence.

If you borrow money to hire 10 mil people to dig a hole in the ground and another 10 mil to fill it back the next day - you'll get 20 mil job creation, more taxes, better economy right? 

Wrong - it's all fake. Those 20 mil don't produce anything useful. As soon as you stop wasting money the whole rotten system will collapse. Good economy does not need to borrow money to stay afloat.

mantisdragon91
mantisdragon91

@IvanGorokhov @mantisdragon91 @fitty_three And what exactly happened at the end of Bush's term that caused debt to go up so drastically? Oh yes a once in a lifetime fiscal collapse. Wonder if that had anything to do with why debt to GDP rose as quickly as it did?

IvanGorokhov
IvanGorokhov

@mantisdragon91 @IvanGorokhov @fitty_three Ask Greece how wasting money and being lazy works. Germany is doing fine on the other hand.

What do you think will happen when China stops giving us money?

During Bush debt was 60% GDP which is sustainable. During Obama it raised to 110% GDP which is not sustainable. 

IvanGorokhov
IvanGorokhov

@mantisdragon91 @IvanGorokhov @fitty_three No one forces Obama to spend a single cent more then he can afford which equals to 0 deficit. He chooses to take debt on our behalf and waste it on "unfortunate" aka lazy ones so that they can continue to live happy lives not working instead of investing in economy. 

Deficit can be brought to 0 today if you stop wasting borrowed money

mantisdragon91
mantisdragon91

@IvanGorokhov @mantisdragon91 @fitty_three Here is a fact for you that you are welcome to try and argue with. When Bush left office the deficit was 10% of GDP it is now 4% of GDP. Remind again who's collapse of the economy forced Obama to take on all this debt in his first couple of years?

IvanGorokhov
IvanGorokhov

@mantisdragon91 @IvanGorokhov @fitty_three Obama took on more debt in 1 term then all previous presidents combined including W. By the time Obama is done with US he'll triple US debt. Doesn't that concern you a bit? Hard to argue with facts. 

mantisdragon91
mantisdragon91

@IvanGorokhov @mantisdragon91 @fitty_three Bankrupt the country in 5-15 years!?! Where exactly did you think we were in 2008 and who got us there? GOP believe the president is a foreign born Muslim and many of them think he is the AntiChrist. How much more stupid and ignorant can you get than that?

IvanGorokhov
IvanGorokhov

@mantisdragon91 @IvanGorokhov @fitty_three From my experience liberal voter are very uneducated people that only care about getting free money today even if country will be destroyed in 30 years from now. GOP is also very corrupt, but at least they have long term plan. Democrats do not.

Mark my words - Democrats with be telling stupid idiots anything they want to hear to stay in power and will bankrupt the country within 5-15 years. When there is nothing to steal left people will ask Republicans to come back and restore US economy from the ruins it will be in and it will take at least the whole generation to do that by hard work.

Frankly having 3rd party of honest people wouldn't hurt at all.

mantisdragon91
mantisdragon91

@IvanGorokhov @fitty_three Ignorant lazy fools? That would be the prime GOP voter demographic you are referring to. And if you want to see mindless crooks just Google the history of the last administration and what they did to this country.