While Congress was in recess this week, the interest rate on federally backed student loans doubled on Monday from 3.4 percent to 6.8 percent after lawmakers in the House and the Senate failed to reach an agreement that would stabilize interest rates going forward.
Student loan rate hike increases struggle for many
But it didn't have to be that way, said Rep. Lynn Jenkins, R-Kan., in the weekly Republican address on Saturday. "Over the last few months, Republicans made every effort to stop interest rates on some student loans from doubling, as they unnecessarily did on July 1st," she said.
Jenkins argued that House Republicans and President Obama were on roughly the same page on student interest rates, blaming the gridlock on Senate Democrats.
House Republicans would have pegged the interest rate on student loans to the interest rate on government debt, allowing it to vary over time as the marketplace ebbed and flowed. That proposal, according to the nonpartisan Congressional Budget Office, could have saved the government $3.7 billion over 10 years, but it may also have exposed borrowers to increasingly high rates over time. Mr. Obama, who has resisted comparisons between his proposal and House Republicans', also proposed affixing the rate to the marketplace but would have set a fixed rate at the time the loan was issued to prevent the uncertainty caused by an adjustable rate.
Many Senate Democrats have rallied instead around a bill that would simply extend the 3.4 percent rate for another year to buy lawmakers more time to broker an acceptable compromise.
"For too long, politicians have been in charge of setting these rates, and we keep coming back to cliffs and deadlines like this one," Jenkins said in her address broadcast Saturday. "So in the spring, when President Obama proposed letting the markets set interest rates instead, the Republican-led House passed a bill reflecting his plan."
"Unfortunately, Senate Democrats attacked the president's plan, refused to work with us and allowed this rate hike to take effect, leaving for the July Fourth holiday without passing a solution," she continued. "Because of this inaction, millions of undergraduates who want to take out a subsidized Stafford loan are now being told they will have to pay an interest rate that's double what they were expecting. That's just not right."
Jenkins called on the Senate to pass a bill in line with the House bill and the president's proposal when it returns from recess next week, and she urged Mr. Obama to light a fire under Democrats in the upper chamber.
The White House has expressed confidence that a solution is within reach, calling for a bill that retroactively erases the few weeks during which the doubled interest rate was in place.