By Alexander Bolton - 06/22/13 10:00 AM EDT
House Republicans on Saturday stepped up the battle over student loans by accusing Senate Democrats of blocking a GOP plan to keep interest rates from doubling.
Without congressional action, rates for subsidized Stafford loans will jump from 3.4 percent to 6.8 percent on July 1.
The House last month passed a bill that would peg student loan rates to the interest rate of 10-year Treasury notes plus 2.5 percent. The rate for Stafford loans would fluctuate from year to year but could not exceed 8.5 percent. The rate for Direct PLUS loans for graduate students and parents would be set at 4.5 percent above the Treasuries rate and capped at 10.5 percent.
“With time running out, the House of Representatives is the only chamber of Congress that has acted to solve this problem,” said Rep. John Kline (R-Minn.), chairman of the House Education and Workforce Committee, said in Saturday’s weekly Republican address.
“Fortunately, President Obama agrees, and in his budget, he offered a plan for long-term reform by tying interest rates to the market,” Kline added. “Heartened by that proposal, Republicans put together a similar measure – the Smarter Solutions for Students Act – and the House passed it last month, weeks before the deadline.”
Obama’s plan, contained in his budget, would set student lending rates to the 10-year Treasury rate plus 0.93 percent for subsidized loans but lock in those rates for the life of the loan. His proposal would cap interest at 10 percent of a borrower’s income. The rate for unsubsidized loans would be tied to the 10-year Treasury note rate plus 2.93 percent.
Bloomberg.com in an editorial dubbed it “Obama’s Republican student-loan plan.”
Kline slammed Senate Democrats for opposing the House bill and called on Obama to put pressure on the upper chamber.
“Senate Democrats have actively blocked the president’s plan and refuse to consider ours. In fact, they have yet to pass a solution of any kind. If I didn’t know any better, I would say they are content to let rates double,” said Kline.
Speaker John Boehner (R-Ohio) sent a letter to Obama in the past week asking him to resolve the stalemate.
“I must assume that you are as frustrated as I am by the actions of Senate Democrats,” Boehner wrote. “On an issue you have made a top priority, it is astonishing that your fellow Democrats have been so openly hostile to your proposal."
Undeterred, Kline attempted to prod Obama to pressure Senate Democrats.
“This 11th-hour scrambling is a perfect demonstration of why we need to take the politics out of student loans once and for all,” he said. “We should now seize the opportunity before us. I urge President Obama to get engaged so we can stop this rate hike and deliver the kind of long-term solution our students and their families deserve.”
Senate Democrats met with White House chief of staff Denis McDonough on Thursday to discuss options for avoiding a doubling of student rates.
They are weighing a plan similar to what Obama has proposed, although Sen. Tom Harkin (D-Iowa), the chairman of the Health, Education, Labor and Pensions Committee, has expressed preference for basing rates on the 90-day Treasury note, which has a lower interest rate than 10-year bonds.
“[We’re] all working really hard to try and come up with something that’s good for the kids, young men and women who want to be educated,” Senate Majority Leader Harry Reid (D-Nev.) said Tuesday. “We’re not there yet.”