President Obama begins an all-out push on Friday to get Congress to extend the low interest rate on federal student loans, White House officials said, an effort that is likely to become a heated battle along party lines. If Congress fails to act, the interest rate on the loans, which are taken out by nearly eight million students each year, will double on July 1, to 6.8 percent.
White House officials said the president was planning a sustained effort through the spring: On Friday, Education Secretary Arne Duncan will discuss the issue at a White House briefing, and on Saturday in his weekly address, the president will call on Congress to pass legislation preventing the rate hike.
Next week, Mr. Obama will again hammer the issue — during visits on Tuesday to the University of North Carolina at Chapel Hill and the University of Colorado at Boulder, and on Wednesday at the University of Iowa. The White House also plans a social media campaign through Facebook, Google+ and Twitter, using the hashtag #DontDoubleMyRate.
At a time when Americans owe more on student loans than on credit cards — student debt is topping $1 trillion for the first time — and the Occupy movement has highlighted the rising furor over spiraling student debt, the issue has moved higher on the political agenda. But the question of what to do about the looming interest rate increase has landed deep in the chasm separating Democrats from Republicans, who accuse the president of using the issue in a fiscally irresponsible way, in an attempt to buy the youth vote.
The Congressional Budget Office has estimated that a one-year freeze on the interest rate for subsidized Stafford loans would cost $6 billion.
“Bad policy based on lofty campaign promises has put us in an untenable situation,” said John P. Kline Jr., the Minnesota Republican who is chairman of the House Committee on Education and the Workforce.
The low interest rate stemmed from the 2007 College Cost Reduction and Access Act, which reduced interest rates on subsidized Stafford loans over the following four academic years — from 6.8 percent to the current 3.4 percent — with the proviso that the rates would revert to 6.8 percent this July. Extending the low rate would be too costly, Mr. Kline said. “We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers,” he said. “I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run — which is what put us in this situation in the first place.”
Mr. Kline, who earlier this year called the interest-rate hike a “ticking time bomb set by Democrats,” said he was exploring other options in hopes of finding a solution that served borrowers and taxpayers equally well.
When the 2007 law was passed, 77 Republicans — most of whom are still in Congress — voted for it. But in the current climate of fractious partisanship, new legislation introduced by Representative Joe Courtney to extend the lower rate has 127 co-sponsors, all of them Democrats.
Mr. Courtney said he was hopeful that some Republican support would be forthcoming as the political stakes became more apparent.
“The visibility of this issue is going to continue to grow as we get closer to the deadline,” he said. “The response of students and parents is one of disbelief that interest is going to double at a time when interest rates are so low, and I think it’s very politically dangerous for Republicans to stonewall this.”
Rich Williams, the higher education advocate for U.S. Public Interest Research Group, said he thought about 14 moderate Republican senators might support the effort to keep the interest rates down.
“This should be a bipartisan issue,” he said. “It’s something everyone gets.”
Outside Congress, even some of the strongest student-aid advocates debate the question. While nearly everyone is in favor of the broad goal of college affordability, some experts wonder whether it is worth risking cutbacks in the Pell program for low-income students, a possible result of using more federal money to keep interest rates low on the Stafford loans, which are in wide use by middle-income students.
But student advocacy groups say it is wrong to view financing for Pells and Staffords as a zero-sum competition.