On Tuesday, nearly all GOP senators voted to block debate on a bill that would prevent student loan interest rates from doubling on July 1st. The 52-45 vote did not meet the 60 needed to motion the bill to the floor.
Extending the 3.4% rate would save student borrowers an average of about $1,000, assuming a 12-year repayment on a $4,200 loan. The bill applies to subsidized Stafford loans, which serve low and middle-income families and are usually paid back over a decade. Without passing the bill, about 7 million students would see their rates double to 6.8% (the higher rate would only apply to loans issued after July 1st).
The Democrat-sponsored “Stop the Student Loan Interest Rate Hike Act of 2012” would extend the lower fixed interest rate on subsidized Stafford loans for one year. Both Republicans and Democrats agree that it would be a mistake not to extend the lower rate, but both parties disagree on how to fund it.
Democrats would fund the $6 billion cost by closing tax loopholes on high-earning professionals. In a separate House bill, Republicans proposed to gut the preventative health fund set aside by President Obama’s healthcare law, a proposal that the White House threatened to veto. Last Friday, the Republican House bill passed but was seen as mostly symbolic; it would never pass the Democratic-dominated Senate. Democrats like Senate Majority Leader Harry Reid, say Republicans know the Democratic party would never vote for their proposal to grab money from the preventative health fund. The two parties ha already comprimisedto “cut that plan to the bare bones” to fund other programs.
The amount of political positioning outsizes any desire to have true, forward-looking debate. Neither party wants to be blamed for being “anti-middle class” during an election year. It doesn’t help that in this instance Democrats and the GOP picked their favorite political targets for funding: rich people and Obama’s healthcare overhaul, respectively.
The expiration of current Stafford loan rates may also be a result of smart politics by Democrats. Rates have only been at 3.4% for one year. The College Cost Reduction and Access Act of 2007 gradually brought down interest rates to 3.4% (from 6.8%) since 2007. As financial aid expert Mark Kantrowitz explains, lawmakers usually put a 5 or 10-year time frame on legislation, but the 2007 law expires after 4. Timing the expiration during an election year and ringing the bells of college affordability is likely to rile up middle-class voters and millennials.
The problem with this debate is that this bill has the country focusing on a very narrow aspect of college affordability. While the general media follows debate on a very specific type of loan, this is an opportunity to discuss much broader reform. Instead, Congress put on a political show, which is telling of its inability to get the bigger things done. With less than two months left, there is still some time for Congress to overcome political stalemate and prevent the rate hike.
Supporters of the bill can tweet with the hashtag #dontdoublemyrate.