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How Will Feds Pay for Keeping Loans Stable?

By Alyson Klein — May 31, 2012 1 min read
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If you haven’t been paying attention to action in Congress on how to keep interest rates on student loans stable for another year, you haven’t missed much, unless you’re a big fan of political squabbling and grandstanding.

There’s been a lot of back-and-forth, but no actual final deal has emerged.

The latest twist? Rep. John A. Boehner, the speaker of the House, reportedly said at a closed door meeting that Congress might not be able to reach an agreement in time to keep loan rates stable. And he reportedly said that the loan crisis was manufactured by Democrats, since they crafted the legislation that set the new, lower interest rates to expire in the middle of an election year.

That prompted this comment from White House spokesman Jay Carney, during today’s briefing:

We've heard before from the Speaker's office that somehow education is not an economic issue. It says that they want to focus on jobs, and suggests that they believe education doesn't have anything to do with jobs. The American people don't believe that.

Then, Republican leaders in Congress, including Boehner and Sen. Mitch McConnell, the Republican leader in the Senate, sent President Barack Obama a letter outlining a bunch of options to pay for the plan, which will cost nearly $6 billion.

Among the possibilities: Upping federal employees retirement contributions (which can be a tough sell with some Democrats), or making changes in other areas, including limiting the amount of time students can have the interest on their loans subsidized while they’re in school, plus making changes to Medicaid and the rules for taxing worker pensions.

Here’s the White House’s response, from spokesman Matt Lehrich:

Earlier today, Speaker Boehner reportedly told his Republican colleagues that he thought this was a 'phony' issue. Now, he's signed onto a letter asking the administration to work with him on a legislative fix. The President will work with members of both parties to prevent the interest rate from doubling because he understands that seven million American college students and their families don't think that an average $1,000 increase on the typical college student's debt load is 'phony.'

Quick recap on loans: Earlier this month, the U.S. House of Representatives passed a bill to keep interest rates on new student loans, which are slated to double to 6.8 percent on July 1, at the current rate of 3.4 percent. But Democrats—including the Obama administration—weren’t so thrilled with the GOP lawmakers plan to pay for the measure, which involved cutting a fund aimed at preventative care, included in Obama’s signature health care overhaul law.

Meanwhile, the U.S. Senate has tried—and failed—a couple of times to get similar legislation passed. It couldn’t get through because Republicans objected to Democrats’ plan to cover the cost (changing tax rules for certain business.)

Now the clock is ticking, but the issues at play remain the same: Everyone wants to keep rates the same. No one can decide how to pay for it. And everyone wants to score political points on this one, so there’s been no shortage of posturing on both sides of the aisle.

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