President Barack Obama on Friday publicly called on Congress to prevent Stafford student loan interest rates from doubling this summer.
The president, who spent time on the 2012 campaign trail speaking out against a rate increase, spoke in the Rose Garden on Friday surrounded by college students. He pressed Congress to extend current rates or work toward a compromise to avoid the increase—3.4 to 6.8 percent—set to take effect July 1.
Lawmakers on both sides of the aisle have said reforms are needed, but they are divided over the solution.
"Higher education cannot be a luxury for a privileged few," Obama said on Friday. He noted, as he has in the past, that it was only nine years ago that he and his wife, Michelle, finally paid off their student loans, which he said cost more than his mortgage. "And we were lucky," he said, noting they had "more resources than many." And this, he added, was around the time the first couple planned to start saving for their daughters' college funds.
Obama had warned on the 2012 campaign trail that allowing rates to double would cost the average student borrower $1,000 for each year of college over the life of the loan. Stafford loans are offered to low- and middle-income students. That added cost could greatly affect families weighing the expense of college, as well as put recent graduates in difficult positions, especially given the current tough economic climate, experts say.
When interest rates were scheduled to double last summer, Congress, facing public pressure, passed a bill to stop that from happening. Obama signed it into law last year. But ahead of this year's July 1 expiration, Washington finds itself in the same situation.
"If this sounds like déjà vu all over again, it's because it is," Obama said on Friday. He called on Americans to once again pressure Congress to act.
The Republican-led House has already acted. House members passed a student loan plan offered by Republican Rep. John Kline of Minnesota, chairman of the House Committee on Education and the Workforce. His proposal ties rates on student loans to the interest on the 10-year Treasury rate. But the White House and many Democrats take issue with that plan because interest rates would change annually.
"The House bill isn’t smart, and it isn’t fair," Obama said. He once again noted that interest rates would change annually under Kline's proposal, which also would eliminate "safeguards for lower-income families."
Several Democrats have offered their own proposals in Congress, as has the president.
Obama outlined his proposal in his budget this year. Like Kline's plan, it calls for tying rates on student loans to the interest on a 10-year Treasury note, but it locks in those rates for the life of the loan.
Some student loan advocates criticize the president's proposal because it doesn't provide a cap on those rates—something included in Kline's plan.
Republican Senate Minority Leader Mitch McConnell chalked Friday's event up to politics.
"With the President and Congressional Republicans in agreement on the need to provide a permanent reform to address the increase in interest rates on new student loans, no one should be fooled by today’s campaign-style event at the White House," the Kentucky lawmaker said in a statement. "House Republicans have already passed legislation that would prevent a rate hike, and Senate Republicans have proposed a solution similar to one the President himself called for in this year’s budget. Here’s one issue where the two parties can and should find quick agreement.
"Unfortunately, the President appears more interested in needlessly stoking partisan divisions in Washington than helping young Americans avoid a higher interest rate on their student loans," he continued.
House Speaker John Boehner, R-Ohio, in a statement on Friday noted that Kline's plan mirrors the president's and said the differences between the two "are small." Boehner then took issue with the president's event, which he argued stokes partisanship.
"With time so short and the differences between our proposals so slight, today’s event was misguided and deeply disappointing," he said. "A president who promised young people he would reject petty partisanship, today practiced it himself. If he really wants to shield students from higher rates, he should work with his former colleagues in the Senate to act. That’s what our students deserve."
Senate Majority Leader Harry Reid, D-Nev., following Obama's remarks on Friday, announced in a statement that the House legislation is a "nonstarter" and that the Senate next week will vote on a Democratic-backed plan offered by Reid and Democratic Sens. Tom Harkin of Iowa and Jack Reed of Rhode Island. That proposal extends the 3.4 percent interest rate for two years while Congress works on a long-term solution.
“I hope my Senate Republican colleagues will put politics aside and join us in providing middle-class families with the security of knowing they won't be forced to pay thousands more for student loans on July 1st. This is exactly the kind of common-sense proposal we need to keep our economy growing," Reid said in a statement Friday.