Senate Democrats searching for another student-loan rate stopgap

posted at 2:41 pm on July 8, 2013 by Erika Johnsen

Along with immigration and the in-limbo status of the farm bill, the issue of student loans will also be atop the Congressional agenda as lawmakers return from the July 4th recess. Last week, the fixed rate for federally subsidized student loans automatically jumped from 3.4 to 6.8, and rather than take up the House GOP’s suggestion that they allow the rate to be tied more closely to — you know — the free market rather than lawmakers’ most arbitrary and political whimsies, Senate Democrats insisted that the GOP’s was an unacceptable solution and instead allowed the stopgap measure holding over the rates from last summer (before the election, hem hem) to expire.

The new rate, however, will only apply to new federally subsidized loans, for which students will be signing up in earnest over the following month or so — and Democrats are hoping to get something, even just another temporary measure, resolved before the new college school year starts. Via Politico:

In the days since the missed deadline, Washington’s political apparatus has been a muddle of messaging. House Republicans are blasting Senate Democrats for not passing a bill as the lower chamber has done, albeit one that President Barack Obama has threatened to veto. And lawmakers from both parties are now using the #DontDoubleMyRate hashtag on Twitter, first popularized by Obama at the height of last year’s presidential campaign.

Senate leaders concede that the optics aren’t great. A Democratic leadership aide called the situation “awkward,” adding: “We need to get it resolved.” …

The Senate will quickly focus on getting the issue off its plate, especially since there is no clear legislative priority list yet post-immigration bill. Leaders are mulling putting forward bipartisan energy efficiency and pharmaceutical safety bills, a defense reauthorization or perhaps an appropriations bill.

How exactly that happens remains as “clear as mud,” as one aide put it. The Senate is angling for a vote on a proposal sponsored by 42 Democrats that would extend for a year the rate of 3.4 percent for those subsidized loans. Sen. Tom Harkin (D-Iowa) said he thought Republicans might sign on to another one-year extension after doing so last year. …

The House already passed its own fix (on which the White House bizarrely issued a veto threat, seeing as how the proposals weren’t that different), and Republicans are looking to put the hammer down this week and get the issue off the table:

Rep. Lynn Jenkins, R-Kansas, faulted Senate Democrats on Saturday for this week’s hike in student loan interest rates and urged the upper chamber to pass legislation that resolves the issue as soon as the holiday recess ends.

“For too long, politicians have been in charge of setting these rates, and we keep coming back to cliffs and deadlines like this one,” Jenkins said in the GOP weekly address. “Paying for college is difficult enough without all this uncertainty. I have two kids in college, I know how hard it can be.” …

Top Senate Democrats want a cap in place to protect students if interest rates spike. That is at odds with the slightly different proposals from President Barack Obama and various congressional Republicans, which are tied to 10-year Treasury bond rates and would include charges for administrative costs but would not include caps.

Republicans, who prefer a more market-based approach, often point out that the White House’s proposal falls more in line with their own.

“When President Obama proposed letting the markets set interest rates instead, the Republican-led House passed a bill reflecting his plan,” Jenkins said. “Republicans in the Senate came to the table with similar ideas. Unfortunately, Senate Democrats attacked the president’s plan, refused to work with us, and allowed this rate hike to take effect, leaving for the July 4th holiday without passing a solution.”

All of which, at the end of the day, is still relatively trivial anyway, seeing as how a doubled rate would only add a matter of a few dollars to the average student debtors’ payments, and the real, glaring, intractable problems are both the government’s endless interference directly inflating tuition prices and the poor economy and employment scenario into which young people are graduating. Ugh.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Obama: “The government is us, and we’re doing things right”

Flange on July 8, 2013 at 2:49 PM

The House already passed its own fix (on which the White House bizarrely issued a veto threat, seeing as how the proposals weren’t that different), and Republicans are looking to put the hammer down this week and get the issue off the table:

The WH is losing what little brain power it had.

and the poor economy and employment scenario into which young people are graduating. Ugh.

Yeah, there are no jobs and employers are salivating over the possibility of all those new H1-B workers, so they’re hoping that amnesty bill gets some traction. Ultimately, people graduating college will have Zero work.

dogsoldier on July 8, 2013 at 2:53 PM

And just why is the Federal government in the student loan business?

That was a rhetorical question BTW.

Johnnyreb on July 8, 2013 at 2:54 PM

The new rate, however, will only apply to new federally subsidized loans

No Obama subsidy for the newly eligible voters Lefties vomited from higher education?

Meh.

socalcon on July 8, 2013 at 2:54 PM

6.8% is still a pretty good rate for an unsecured loan.

3.4%? I refinanced my house last year, and I’m still a tick over that.

Chris of Rights on July 8, 2013 at 2:58 PM

Bark will somehow get involved and burn the entire process to ashes.

Bishop on July 8, 2013 at 2:58 PM

Somebody help me here. I recall Obamacare got some its funding from these higher student loan rates. I mentioned this before and saw no other comment on it. Wasn’t that part of the reason student loans were taken over by the feds?

DanMan on July 8, 2013 at 3:03 PM

Nice.

The government gets 6.8% interest on taxpayer’s money loaned to college students.

The taxpayers are lucky to get 1.5% interest on their own money.

fogw on July 8, 2013 at 3:03 PM

If I were a pub in the House, I’d go along with the Senate Democrats to extend the rate cap for another year –

– if in return they also capped the total amount of loans that can be provided at these rates to 5% below the current maximum.

– and had a mandatory counseling session with borrowing students that included the current dropout and graduation rates for that university, and employment rates for the student’s currently declared major

– and required the universities to hold a mere 3% of the paper they push.

It’s time to start sending universities a message that the money spigot is being closed off just a bit. That would cause them in turn to start advising students of what’s really happening.

Steve White on July 8, 2013 at 3:03 PM

It’s time to start sending universities a message that the money spigot is being closed off just a bit. That would cause them in turn to start advising students of what’s really happening.

Steve White on July 8, 2013 at 3:03 PM

Never going to happen. Both the Dept. of Education and the VA are goping after all of those “for profit” Colleges and Tech Schools claiming they are ripping off students and their graduation rates are low and dont go their, etc. Never mind those schools graduation and job placement rates are higher than public scools. Just big government trying to steer public money to their pet projects.

Johnnyreb on July 8, 2013 at 3:14 PM

All of which, at the end of the day, is still relatively trivial anyway, seeing as how a doubled rate would only add a matter of a few dollars to the average student debtors’ payments,

This is a timely discussion for me: my first child is preparing to start college in the fall. That difference in rate could mean more than $9000 additional cost over the life of the loan (if he chooses to take the max available loan amount). Monthly payment for 10 year loan could increase by $75 per month. Not sure about you, but that’s not trivial for him.

dont taze me bro on July 8, 2013 at 3:15 PM

Somebody help me here. I recall Obamacare got some its funding from these higher student loan rates. I mentioned this before and saw no other comment on it. Wasn’t that part of the reason student loans were taken over by the feds?

DanMan on July 8, 2013 at 3:03 PM

The unsubsidized rate for student loans has been at 6.8% since the Obamacare takeover of the loan industry, now it just applies to those who are less likely (low income, low credit) to pay back their loans as well.

weaselyone on July 8, 2013 at 3:20 PM

Thank you CoffeeLover. Next question is why this isn’t mentioned every time these interest rates are mentioned on this site? it’s not like it ever gets mentioned in the dinosaur media. I was worried I made a mistake last week when I mentioned it.

DanMan on July 8, 2013 at 3:38 PM

DanMan on July 8, 2013 at 3:38 PM

YVMW DanMan

You didn’t make a mistake and I’ve asked myself the same as to why it is not mentioned every time it came up be it in the media or in Congress. I’m so tired of yelling at the TV when I hear that neither the media or the Rs being interviewed or on the floor of Congress that I can make a better case than what I am hearing.

CoffeeLover on July 8, 2013 at 4:08 PM

Somebody help me here. I recall Obamacare got some its funding from these higher student loan rates. I mentioned this before and saw no other comment on it. Wasn’t that part of the reason student loans were taken over by the feds?

DanMan on July 8, 2013 at 3:03 PM

This reminds me of a Andrew Dice Clay joke… The government needed the money.

Fallon on July 8, 2013 at 4:26 PM

All of which, at the end of the day, is still relatively trivial anyway, seeing as how a doubled rate would only add a matter of a few dollars to the average student debtors’ payments

Not sure where you’re getting your figures, Erika. Quickly checking my HP 12C (well, the iPhone emulation app :) — On a $30K, 10-year loan, upping the interest rate from 3.4 to 6.8 adds about $50/month to the payment ($345 vs. $295). That’s definitely not “trivial” to somebody in an entry-level job.

KS Rex on July 8, 2013 at 5:13 PM

Boo hoo we pay a higher rate on my husband’s loans and have for >10 years. A rate that is not tied to market rates is more prolonging childhood.

earlgrey133 on July 8, 2013 at 6:09 PM

I’ve said it before elsewhere, and I’ll say it again:

I am completely convinced that Barack Obama will offer student loan forgiveness as a carrot for the 2014 midterms. The more news we hear about the loan rates, unemployment/underemployment among grads, etc., the more I believe this will happen.

The GOP and conservatives must prepare for the response, because — the way things are going — Obama’s going to need one gigantic trump card to turn the 2014 elections to the favor of the Democrats.

englishqueen01 on July 8, 2013 at 6:37 PM