Democrats got the fight they wanted on student loans, but it’s backfiring on them with just 10 days to go before interest rates for millions of students are set to double unless Congress acts.
One year after Republicans were caught flat-footed on the need to keep student loan interest rates low, an issue vital to young voters, Democrats sought to capitalize on the matter. They took political advantage of Senate Republicans filibustering their plan, and were eager to blame the GOP for the looming rate increase. But in recent weeks Republicans have come up an effective response: Let’s just pass the president’s plan.
In doing so, Republicans have exploited a rare policy split between Obama and congressional Democrats on how to prevent federally subsidized loan rates from automatically doubling from 3.4 percent to 6.8 percent on July 1.
Obama’s plan, unveiled in his fiscal 2014 budget, is to essentially tie the rate to the yield on the 10-year Treasury bill, alongside safeguards to protect students from drowning in debt. Republicans support the concept of a permanent fix that ties the loan rate to the market — the House GOP passed a version of it with fewer safeguards last month. Senate Democrats oppose the entire concept but their alternate proposal has been blocked by a GOP filibuster.
And so what might have been a slam dunk issue for Democrats is now being used against them by Republicans. They’ve been quick to note that Senate Democrats have criticized Obama’s loan fix — most notably Senate Health, Education, Labor and Pensions Chairman Tom Harkin (D-IA), who said he was “upset” with the President’s plan and even said it would harm the African-American community.
Obama has tried to do damage control by threatening to veto the House GOP’s loan fix and throwing his support behind Senate Democrats’ different approach, which would freeze of the current rate for two years and fund it by closing unpopular tax loopholes for oil and gas and offshore havens. But GOP leaders keep pointing to Obama’s own plan.
“Let me be clear: Senate Democrats’ unwillingness to follow your lead is the only thing standing in the way of a long-term solution for students,” House Speaker John Boehner (R-OH) wrote in a letter to Obama on Thursday. “I urge you, as president and the leader of your party, to compel your Democratic colleagues to pass a market-based student loan bill before you leave the country next week.”
Last week Sen. Richard Burr (R-NC), on behalf of Senate Republicans, brought up for a vote what they said was Obama’s exact student loan fix. But Sen. Elizabeth Warren (D-MA) blocked it on behalf of her party’s leadership, which said it hadn’t vetted the bill.
One week later, Democrats still don’t have a good answer to this proposition, and the White House has been quieter on the issue. Democrats privately acknowledge that they’d be trapped if Obama calls on them to bring up that measure for a vote, even if he continues to side with their two-year freeze. Complicating matters is that Senate Democrats are more focused on immigration reform legislation that is pending in the upper chamber.
For now, President Obama isn’t acquiescing to Boehner’s request.
“As the President has said repeatedly, Congress must act to prevent student loan interest rates from doubling for millions of Americans on July 1,” White House spokesman Matt Lehrich told TPM on Thursday afternoon. “While we’re glad House Republicans are paying attention to this looming problem this time around, the plan they passed doesn’t solve it. In fact, a typical freshman could actually pay more under their plan than if Congress did nothing at all. That’s probably why even a Republican Senator recently called it a bad idea.”
Student advocates, meanwhile, oppose the concept of tying student loan rates to the market and prefer the Senate Democrats’ plan. They warn that although the 10-year T-bill yield is low now, it’ll rise as over time and invariably harm young Americans and their families who are already being crushed by the rising costs of college tuition.
Senate Majority Leader Harry Reid (D-NV) said Tuesday that his members are working on a solution “that is good for the kids,” mentioning Warren and Sens. Jack Reed (D-RI), Joe Manchin (D-WV) and Angus King (I-ME). “We’re not there yet,” Reid told reporters.
Last summer, congressional Republicans were embarrassed when Mitt Romney, eager not to alienate any more young voters, sided with President Obama plan to prevent student loan interest rates from doubling on July 1. So they quickly folded and passed a one-year freeze, but not before letting Obama’s campaign turn more millennial voters against them.
Republicans’ lack of credibility with young voters brings into question whether Democrats will actually take more of the blame if Congress fails to fix student loan rates in time. But this year, they’re better prepared to fight back.
