Obama Threatens To Veto House Republican’s Student Loan Bill
The House is set to vote Thursday on a Republican-sponsored bill that aims to keep student loans affordable for current and future students and families—but it seems the legislation wouldn't go far, as the White House said today that President Obama would likely veto the bill if it reached his desk.
With only about six weeks until rates on subsidized Stafford loans double from 3.4 percent to 6.8 percent, Congress needs to act soon to prevent a hike for millions of students across the country.
According to a statement released by the White House, the bill sponsored by Rep. John Kline (R-Minn.), chair of the House Education and Workforce Committee, is the "wrong approach" for several reasons:
- It doesn't ensure low rates for today's students. With interest rates subject to change as the market it clouds an already convoluted process for students and their parents as they assess the costs of borrowing for college.
- It would impose the largest interest rate increase on low- and middle-class students and their families.
- It doesn't include repayment options for borrowers who have already left school, leaving those education loan borrowers of any age stranded as the struggle to manage debt burdens felt by current student borrowers.
- The bill uses student loan interest rates for defecit reduction, shifting the responsibility of balancing the budget on the backs of students and education borrowers of all ages.
Senate Democrats want to extend the current 3.4 percent rate on Stafford loans for two years to give Congress time to find a more long-term solution to the growing student debt crisis.
Like the Kline bill, the proposal in President Obama's budget would tie the rate on new federal student loans to the Treasury's actual cost of borrowing, but it would remain fixed for the life of the loan so that borrowers would have certainty about the rates they would pay.
Unlike the House Republican's bill, the president's budget doesn't provide a cap for the interest rate—which could potentially leave students and families stuck with more expensive student loans when interest rates rise with the market in the future.
To address this issue, the president's budget includes an expansion of the "Pay As You Earn" repayment option to all borrowers with federal student loans to ensure that no borrower is forced to pay more than 10 percent of his or her discretionary income on student loans.
If Congress doesn't choose a plan of action before July1, more than 7 million students and their families will see their rates jump from 3.4 percent to 6.8 percent, compounding the myriad of other student debt worries expected this fall.
Naima Ramos-Chapman is an associate editor at Campus Progress.