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THURSDAY BUZZ: Competing Student Loan Interest Rate Bills Emerge as Obama Pushes Issue on Campus Tour

April 26, 2012


​The impending increase in student loan interest rates rose to the top of the news cycle this week as President Obama discussed the issue at events on campuses in North Carolina, Colorado and Iowa.

The interest rate on new subsidized Stafford loans to undergraduate students is scheduled to double, from 3.4 percent to 6.8 percent, on July 1 unless Congress intervenes.

Both the Senate and House moved quickly to respond to the new spotlight on the increase, introducing bills—two in each chamber, sponsored by each party—that would keep the rate at 3.4 percent for one year. The primary difference in the four measures is how they would pay for the freeze.

Senate Democrats would offset the estimated $6 billion cost by eliminating a tax provision that allows some small businesses, classified as S corporations, to avoid certain payroll taxes. House Democrats offered a bill that would pay for the freeze by cutting subsidies to oil companies. Republicans in both chambers responded with measures that cut a fund included in the Affordable Care Act that helps prevent chronic diseases to offset the cost of their bills.

The lower rate stems from the 2007 College Cost Reduction and Access Act, which reduced the interest rate on subsidized Stafford loans over five years, from 6.8 percent to 3.4 percent. The estimated cost of $6.2 billion from 2007 to 2012 was paid for through changes to the terms of loans issued under the now-eliminated Federal Family Education Loan program.

For more on the rate increase and the response to it, see the following stories:

President and Parties Focus on Proposals to Keep Student-Loan Interest Low
The Chronicle of Higher Education

Two Parties Find a Way to Agree, and Disagree, on Student Loan Rates
The New York Times

Congressional Battle Brewing on How to Pay for Student Loan Rate Cut
The Washington Post
(free reg. req.)

UNC Students Drawn to Obama’s Student Loan Debt Story
iverse: Issues In Higher Education

Obama Presses on College Costs as Romney Vies for Youth Vote

Loan Interest Rates: How Obama And Romney Are Both Wrong
The Huffington Post

OPINION: Subsidize Students, Not Tax Cuts
The New York Times

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