Student Loan Standoff to Test Hill’s Summer Tone
"The House [left] for its weeklong Memorial Day break [yesterday] afternoon after passing a GOP-crafted student loan extension, setting up the first big countdown showdown of the year in just five weeks, just before the congressional break for July Fourth," David Hawkings writes in a blog post for Roll Call. "At issue is the scheduled doubling of the interest rate on subsidized Stafford student loans, a predicament that also produced a partisan standoff last year that threatened to delay the Independence Day recess. Back then, at the last minute (in an election year), Congress granted a reprieve to 7 million college students and their families, keeping the rate from doubling to a fixed 6.8 percent from the super-low 3.4 percent. But it made the fix for only one year. With the election past, another round of drama over a temporary solution didn’t at first look likely to be repeated, especially not after President Barack Obama this spring proposed making the rates more flexible by pegging them to 10-year Treasury notes, a market-based approach designed to entice Republican support. But the GOP bill being passed today takes the idea a significant step further — so much further, in fact, that the Obama administration has threatened a veto. While the House measure would link the rate to T-bills, as Obama proposed, it would set a much higher cap than the president on the maximum interest rate: 8.5 percent. And it would dictate a resetting of the rate for all borrowers each year, based on market fluctuations (the president’s proposal would fix the initial rate for the life of the loan). The House bill also leaves out the plans for new repayment flexibility that Obama asked for. The White House and most congressional Democrats say the GOP plan would revive the culture of predatory adjustable-rate mortgage lending that fueled the housing collapse of the recession, and that lower-income students would end up ruing the day they signed up for Stafford loans."
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