President Barack Obama used a Friday Rose Garden speech on government-controlled student loans to help him campaign for the 2014 mid-term elections, amid proliferating scandals and derision from the House education leaders.
Obama’s plan would allow interest rates on future government-provided student loans to rise or fall once per year. But the plan would also allow current borrowers to pay off their long-duration loans at today’s historically low rates.
In 2010 and 2012, Obama used government power to offer low-rate students loans to younger voters. Those campaign-trial fixes expire this year, giving him another opportunity to offer Democratic-branded aid to students, many of whom have incurred student debt to improve their credentials in a stalled, high-unemployment, low-wage economy.
“This event is nothing more than a cynical PR stunt to change the conversation from his scandals,” said Kirsten Kukowski, a spokeswoman for the Republican National Committee. “Instead of working with Republicans who have already passed legislation, Obama is holding a media event.”
The new proposal could spur graduates’ support for Obama, especially because the 2012 rates are expected to double to 6.8 percent on July 1 for 11 million graduates with Stafford student-loans. The president’s proposal would lower rates for the 11 million to as low as 2.9 percent.
“The House has already taken action, approving legislation that mirrors the president’s own proposal to shift interest rates to a long-term, market-based solution,” said a critical statement from the House’s Education and Workforce Committee.
“When bipartisan compromise is within reach, why is President Obama turning to petty politics and campaign gimmicks at the expense of students and their families?” said the statement, issued on Thursday.
The GOP has tried to reduce the Obama’s political manipulation of the student-loan sector by shifting the loan-sector back to the commercial banks.
In the market, student and banks’ competing pursuit of advantage is expected to lead to a more ideal balance of education spending, debts, profits and students’ time.
Minnesota Rep. John Kline has worked with Secretary of Education Arne Duncan to draft the new legislation, which Duncan seemed to compliment last week.
“We are interested in a long-term fix, we are interested in it being budget-neutral and look forward to continue conversations with you and others to find some common ground,” Duncan told the committee May 21.
But Obama wants a fight that could boost pro-Democratic turnout in November 2014.
The House bill “isn’t smart and it’s not fair,” Obama said Friday. “I need you to call them up, or email them, or find them on Twitter.”
“While the administration welcomed action by the House on interest rates, it unfortunately moves us in the wrong direction,” said a Friday statement from the White House. “Under the recently passed House legislation … many borrowers could end up paying even more than if Congress does nothing at all.”
“The same college freshman who could save over $4,000 dollars under the president’s plan would pay over $200 more under the House Republican plan,” the statement added.
Unemployment of younger Americans is at 13.1 percent, up slightly from 12.5 percent in in January 2009.
Student debt has grown rapidly since 2009, and now exceeds credit card debt, partly because college costs have risen 31 percent since early 2009.
Graduates’ collective $1 trillion debt is damaging the non-college economy, because it slows consumer consumption, delays home-buying and marriage.
The damage has also hit graduates, ensuring that roughly half are working in lower skilled, hourly-paid jobs. The starting salary for graduates has fallen 10 percent to $27,000 since 2007, boosting student-loan defaults to 9.1 percent in September 2012.
The White House’s increased role in student loans was included in the 2010 Obamacare bill that extended federal control over the nation’s health-care sector.
The 2010 Dodd-Frank law that regulates the financial sector also helps the White House’s ability to change the student-loan sector.