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July 1 Deadline Looms for Rise in Student Loan Interest RatesJune 20, 2012 by Kaukab Jhumra Smith
WASHINGTON - With only 10 days to go before interest rates on some government-subsidized student loans are to double, Democrats and Republicans in Congress continue their stand-off over how the government should pay for the billions it would cost to keep rates at their current level for another year.
Despite the numerous versions of student-loan bills floating around the House and Senate, the prevailing belief on Capitol Hill is that the financing proposal raised by Senate Majority Leader Harry Reid (D-Nev.) in a June 7 letter to House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell(R-Ky.) appears the likeliest to garner bipartisan support.
More than 7 million students could be impacted by the impending rise in subsidized Stafford loan interest rates to 6.8 percent. It is an issue on which President Barack Obama has been stumping at colleges around the country, and even on late-night TV, since April.
Administration officials have also been urging action.
“Failure is not an option here,” warned U.S. Education Secretary Arne Duncan in a recent public interview. “We have to get this done and I desperately hope Congress does the right thing.”
Tuition at four-year public universities is going up by an average of 8.3 percent a year, according to the College Board, an increase that students are largely financing through loans. Student loan debt in the United States now totals $870 billion, surpassing even total credit card debt or auto loan balances in the country, according to the Federal Reserve Bank of New York. If no bipartisan resolution can be reached in Congress by July 1, the interest rate increase on the subsidized Stafford loans is likely to raise college costs by $1,000 a year per student, warns a report by the advocacy organization StudentPIRGs.
Although students with current loans have locked in rates for the year, the rate increase will affect them when they reapply for a loan next year, as they are required to do, said Chip Unruh, the spokesperson for Sen. Jack Reed (D-Conn.).
Sen. Reid has proposed generating revenue to make up for the nearly $6 billion it would cost the federal government to keep student loan interests low by reducing the tax deductions that corporations receive on pension liabilities, and raising corporate premiums for federal pension insurance. Republicans have greeted Sen. Reid’s proposal with silence, not instant denunciation, a sign of promise in the current Congressional climate, Democrats said.
“Sure, we’re looking at that,” said Michael Brumas, communications director for Senate Minority Leader McConnell, when asked by Youth Today about Sen. Reid’s proposal.
But, Brumas added, Republicans have not yet received a response to their own proposals on the issue, presented in a letter to the White House on May 31. “We’ve not heard anything back from Senate Democrats or the White House so there’s no bill right now,” Brumas said. “You know the Senate’s controlled by Democrats ... We’re waiting for them to come forward with a bill.”
But it’s Republican unwillingness to bring the bills to the floor of the Senate that has stymied Democratic-sponsored legislation on the issue, protests Unruh.
“They keep filibustering everything,” Unruh said, saying that while they have majority support, Democrats do not have the 60 votes necessary to overcome a Republican filibuster. “We think they (the Republicans) have been a bit disingenuous through this process and their actions are not meeting their words.”
Democrats point to the budget proposal put forward by Rep. Paul Ryan (R-Wis.) which keeps student loan rates at 6.8 percent, as evidence of what they say is a lack of serious Republican interest in the issue. Republicans in Congress came up with their own legislation only after presumptive Republican presidential nominee Mitt Romney expressed his own support for keeping interest rates low, Senate Democrats charge.
The only legislation that has actually passed either of the chambers of Congress is the Interest Rate Reduction Act, a House bill sponsored by Rep. Judy Biggert (R-Ill.) and backed by her party, that would have paid for the lower interest rates on subsidized Stafford loans by cutting funds from preventative health care programs. President Obama made clear he would veto that bill and the Senate appears unlikely to take it up. Rep. Biggert’s office did not return a call from Youth Today.
Such a bill forced lawmakers to choose between two middle-class priorities, said Rep. Joe Courtney (D-R.I.), calling it “a ridiculous 'Sophie’s Choice' proposal.”
House leaders have indicated they are open to other funding proposals but are unlikely to take a second shot at a student-loan bill until they know what’s coming out of the Senate, Rep. Courtney said.
If the impasse is resolved before the July 1 deadline, it’s likely to be at the eleventh hour, several staffers agreed.
“The House leadership is looking to the Senate,” Rep. Courtney told Youth Today. “That’s the good news: this thing can move once it gets out of the Senate on a pretty fast track.”
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