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Today's Top News
GOP, Dems 'Play Chicken' with Student Loan Rates in US Senate
Small fixes like Stafford interest rate cuts will do little for crushing student debt
Competing proposals in the US Senate on how to prevent a doubling of Stafford college loan rates has Democrats, including Obama's White House, playing a public game of chicken with their Republican opponents.
But what should the 7.4 million students be concerned about as the political drama plays out on news shows and on the floor of the Senate? Probably, according to experts, they should be upset that so much oxygen is being consumed on a relatively minor college-cost issue like the interest rate increase which, whether it passes or fails, will do little to make college more affordable.
The Senate plans a Tuesday roll call on the plan, which would extend today's 3.4 percent interest rates on subsidized Stafford loans for another year. Without congressional action, those rates will double July 1, going up to 6.8 percent.
"This is not the silver bullet that is going to solve college affordability," said Rich Williams, a higher-education advocate for the U.S. Public Interest Research Group, which has urged Congress to extend the lower rate, but which Williams says is the 'minimum' lawmakers should do.
Americans now owe more on student loans - estimated at more than $1 trillion – than on credit card debt. According to Rita Kirshstein, director of the Delta Cost Project, which studies education costs, who spoke with Progress Illinois, students will scramble to pay for increasing tuition rates no matter what comes out of the Senate.
“What happened in the past five years, particularly with the 2008 recession, state appropriations [for post-secondary institutions] have been cut drastically,” Kirshstein said. “In order to make up for appropriations going down, money has to be made up somewhere or spending has to be cut, and higher education seems to have a harder time cutting spending than asking for more tuition.”
At UC Berkeley, Rep. Barbara Lee (D-Oakland) told the San Jose Mercury News that state and federal budget cuts -- not college spending -- were the problem. A steady decrease in supportive programs has matched a steady rise in tuition costs, leaving students paying more each year. "Students shouldn't have to pay for (budget cuts)," she said. "This one piece, which is not a big piece, needs to be figured out."
"Everything counts when it comes to tuition," said Brittany Kitchen, a UC Berkeley sophomore who told the Mercury News she is $40,000 in debt already. "I considered graduate school for a very long time. Now I'm not sure whether I'm going to be able to do that."
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Associated Press: Senate heads toward showdown vote on student loans
Republicans say they favor freezing student loan interest rates but oppose how Democrats would finance the $6 billion bill: by raising Social Security and Medicare payroll taxes on high-earning stock holders of some privately owned corporations.
"They know we're particularly upset about this" financing plan, Sen. Michael Enzi, R-Wyo., said as the Senate debated the bill Monday. He said Democrats hope that when Republicans oppose the bill, it will "make it look like Republicans want to raise the rates on students, and that's not true."
As if issuing a dare, Senate Majority Leader Harry Reid, D-Nev., said, "Republicans claim they share Democrats' goal in protecting these 7 million students I've talked about from these interest rate increases. We'll see."
Republicans are demanding a vote on their own alternative. It would block the rate increase but pay for it by killing a preventive health fund created by President Barack Obama's 2010 health care overhaul.
That idea is a non-starter with Democrats and could not pass the Senate. The GOP-led House approved a bill two weeks ago paid for that same way, and the White House immediately threatened to veto it.
Without support from the other side, neither party will have enough votes to push its measure to passage. But the issue has become a high-profile, symbolic tussle over which party wants to do more for Americans scrounging to get by at a time jobs are hard to find, and each side is happy to force the other to take embarrassing votes.
With both parties focused on this November's presidential and congressional elections, it is no coincidence they each have chosen to pay for their bill with a favorite target that they believe speaks to their core voters: Democrats going after higher revenues from the rich, Republicans trying to punch a hole in Obama's health care overhaul.
Behind the scenes, aides from both parties have been trying to find a consensus way to pay for the bill. With neither party eager to appear to be causing college students to bear higher costs, conventional wisdom is that eventually a compromise will be struck, but first the political posturing will have to play out.
Subsidized Stafford loans are for low- and middle-income students. The higher rates, should they occur, would only affect students taking out new loans starting July 1.
The Education Department estimates 7.4 million students will borrow $31.6 billion in such loans in the year beginning July 1, averaging $4,226 for each student.
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