While running for re-election, President Barack Obama pressured lawmakers to extend the fixed rates for a year. Republican challenger Mitt Romney joined the call, and Congress obliged both candidates. Congress acted two days before the rate on unsubsidized Staffords would have doubled.
Since then, the president has continued public pressure on Congress to address a pressing problem for students.
“It’s a different year,” said John Kline, the Minnesota Republican who heads the House Education and the Workforce Committee. House Republicans aren’t open to a temporary change, Kline said -- “We’ve already been there.”
The talk about student loans this week hasn’t been limited to federal loans.
Private loans make up about 15 percent of outstanding educational debt. They’re considered riskier because their interest rates are usually not fixed and they don’t offer the same type of protections as federal loans such as income-based repayment when borrowers get into trouble.
A Federal Reserve official told the Senate Banking Committee June 25 that lenders of private student loans should reduce default risk by helping struggling borrowers come up with alternative payment plans.
One of the major lenders, Discover Financial Services, announced yesterday that its fixed interest rate on student loans was dropping to as low as 5.49 percent.
Dueling Plans
On May 23, the Republican-run House passed Kline’s legislation that would tie student loan interest rates to the 10-year Treasury note plus 2.5 percent. In the Senate, Reid tried to round up votes for another extension, and fell short of a required 60-vote supermajority.
Obama has his own proposal to subject the Stafford loans to interest-rate fluctuations and save the government $3 billion over 10 years.