Tags: Obama | College | Loan | Rate

Obama Presses Case to Freeze College Loan Interest Rate

Friday, 20 Apr 2012 03:53 PM

 

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President Barack Obama has begun a push for Congress to freeze interest rates on certain student loans, a move aimed at appealing to the middle-income and younger voters who are crucial to his re-election strategy.

Interest rates on federally-subsidized Stafford loans are scheduled currently 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.

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

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 re-emphasize his pitch in front of college audiences in the battleground states of North Carolina, Iowa and Colorado next week. He’ll 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’s frequently 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 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.

Romney’s campaign didn’t immediately respond to a request for comment on Obama’s proposal on loans.

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

Concerns on Cost

“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.”

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.

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.


© Copyright 2014 Bloomberg News. All rights reserved.

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