Why July 1 Is a Ticking Time Bomb for College Students
President Barack Obama kicked off a new critical campaign for college students on Friday.
He wants to stop student loan rates from increasing in July. Unless Congress acts by July 1, student loan interest rates on new subsidized Stafford loans will double from 3.4 percent to 6.8 percent.
“It's like a $1,000 tax hike,” Obama said at an event in the Rose Garden with college students.
Tying the debt to the rebounding economy, he said people with student loans often delay major purchases such as cars and houses. Doing so hurts the overall U.S. economy.
Like all things in Washington, this issue immediately became divisive.
Republican Senate Minority Leader Mitch McConnell of Kentucky called Obama’s remarks a “campaign-style event.”
Both sides of the aisle agree that something has to be done about the student loan crisis—but the answer is unclear. Last year, Republicans went along with GOP presidential candidate Mitt Romney and voted to extend the low interest for loans. But 2012 was an election year and votes from college students were at stake. This year, it’s a different story.
Last week, the Republican-controlled House passed a plan to reset student loan rates every year in line with financial markets. Obama rejects this. He wants low student loan rates to be locked in, but not necessarily with the financial markets.
Meanwhile, Massachusetts Senator Elizabeth Warren wants student loan interest rates to lock in at about 0.75 percent, the same level that the Federal Reserve gives major banks.
Obama said on Friday that college must be more affordable.
“Since most of today’s college students were born, tuition and fees at public universities have more than doubled,” he said. “And these days, the average student who takes out loans to pay for four years of college graduates owing more than $26,000.”
Lara Brown, a politics professor at Villanova University, told TakePart that Obama’s ongoing mission on student loan rates is smart.
“It is really a good political issue,” she said. “It generates good feelings, positive feelings around helping students.”
But the Republicans are ready for battle.
“I mean, come on,” Brendan Buck, a spokesman for House Speaker John Boehner told The Hill. “The White House would no doubt love to change the subject from all of its various scandals, but trying to pick a fight over a plan that mirrors the president’s own, giving him a ‘rare win,’ is pretty pathetic.”
The Center for American Progress wants a long-term fix for the increasing student rate problem.
“We recognize that a short-term fix may ultimately be necessary to prevent interest rates from increasing for subsidized student-loan borrowers,” David A. Bergeron and Tobin Van Ostern wrote on the center’s website. “This is far from ideal, however, and Congress should only consider a short-term fix if competing priorities interfere with the passage of high-quality, long-term legislation. It is also critical that any savings needed to pay for the short-term fix should come from sources other than the federal student aid system.”
Students may be struggling, but they aren’t staying silent.
Next week, politicians will hear from students themselves as they descend on Washington, D.C., as part of the Center for American Progress’ campaign for student loan reform.
“All day, we’ll have people going in and out of Congress buildings, meeting with senators and bringing their personal stories and experiences directly to those who have the ability to keep interest rates low,” Tobin Van Ostern, who works on education issues for the Center for American Progress, told NPR.