Messer: Obama is Playing Politics With Student Loans

But in a Rose Garden address last week, the president urged students and graduates to keep applying pressure on Republican lawmakers to adopt his own plan and avoid an upcoming rate increase, reports CNN.

Republicans say their plan would tie the student loan rate to economic factors, and not leave rates up to Congress, a plan Obama agrees with for the most part.

“Unfortunately, rather than seize this common ground and move the ball forward, the president resorted to campaign-style tactics, stepped out into the Rose Garden, and denounced the plan,” Messer said.

The plans differ because of differences between when the two sides say the interest rates on student loans should lock in. Obama says the rates should lock in right away, when the money is borrowed, while Republicans want them to keep rising until the student graduates.

The two sides also differ on maximum rates. The House wants to cap interest rates at 8.5 percent, while the Obama proposal has no cap, but includes a program to limit a student's loan paybacks to no more than 10 percent of his or her discretionary income.

Messer said in Saturday's address that he would not have been able to go to college without scholarships, grants, loans, and odd jobs.

“What makes this country great is that my story is not exceptional,” he continued. “Every year, millions of American students see their career dreams begin with the help of federal student financial aid.”

However, he pointed out, in July 1, student loan rates are to double from 3.4 percent to 6.8 percent, a move that the House acted to stop in an attempt to reduce rates and keep politicians out of setting interest rates.

“Taking the politics out of student loans is a common-sense fix,” he said.

But Democratic senators, he said, "tried to take the easy way out and maintain the status quo, which will only hurt students in the long run. Our young people deserve better. Student loan relief is just one example of the solutions Republicans have put forward to get our economy back on track.”

OUR VIEW: Both parties must agree on student loans

This legislative logjam comes with significant consequences for students. If the parties cannot reach a compromise, on July 1 the current 3.4 percent interest rate on need-based loans for middle to lower income students will double to 6.8 percent, affecting about 7 million college students.
This battle is not new. The student loan program has been the object of contention since the 1950s. Today, the debate centers on whether student loans should have fixed interest rates to offer students predictability or variable rates to reflect the market.

Student loans had fixed rates for the first three decades, then variable rates from 1992 to 2006. Democrats at that time promised to cut student loan rates in half, passing a temporary reduction until July 2012. In the heated election year, that was extended for another year.
So we're back to a July 1 sunset, when rates will revert to the 6.8 percent of 2006.
House Republicans have passed a bill (H.R. 1911) with variable rates and a cap of 8.5 percent. Here's the problem: While market interest rates today are at historic lows, economists predict that they will rise over time as the economy improves. The way Republicans have set the variable rates, students would do worse under H.R. 1911 than under the doubled 6.8 percent rate.
The Congressional Research Service has laid this out in a chart. Assume a financially needy student borrowing the maximum $19,000 for college, starting in 2013-14. Under the current 3.4 percent rate, that student would pay $3,450 in interest; under the 6.8 percent rate, $7,284. But under H.R. 1911's variable rate, the student would pay $8,331 in interest.
Doing nothing, letting the rate double to 6.8 percent, would be better than H.R. 1911.
Senate Democrats also support a variable rate, but different from the House Republican version. They want a two-year extension of the 3.4 percent rate; after that, rates would be variable, tied to the interest on a 10-year Treasury note plus a percentage to cover program costs. Interest would be capped at 6.8 percent.
For his part, the president set out a middle position. He would lock in the 3.4 percent rate for another year, then have interest rates vary from year to year for new loans — but fix the rate for the life of the loan, like a traditional home mortgage. He would have no cap.
Rhetorically, the parties are miles apart, but not in the details of their proposals. With a good- faith effort, they should be able to reach agreement before July 1.
They need to settle on a couple of principles. Interest rates should not be set higher than needed to break even on the program. Set a reasonable cap so students have some predictability. Beyond that, all parties should remember the aim of the federal student loan program is to assure that students of all incomes have access to a college education.
People expect to borrow to pay for a car or house. Borrowing for a college education should be affordable enough to be a sound investment.

Read more here: http://www.mercedsunstar.com/2013/06/05/3056122/both-parties-must-agree-on-student.html#storylink=cpy