The Interest Rate Dance Begins in Earnest

For several months now, it's been clear that that the approaching interest rate jump on subsidized student loans was going to be a major election year issue.  President Obama announced several months ago that he didn't want the rate increase to go into effect July 1.  Then more recently presumptive Republican party nominee Mitt Romney announced that he agreed the interest rate should stay at 3.4 percent.  This moved the debate to how to pay for continuing the current rate.

Democrats proposed a change in the taxes on S corporations, while Republicans proposed eliminating part of Obama's health care reform bill instead.  Following symbolic votes on those proposals in each chamber, the horse trading has gotten more serious in recent weeks.  Republicans now have proposed a new set of tax offsets straight out of Obama's own budget plan.

Then when Obama chided Congress for not acting on the interest cut in a June 7 speech at the University of Nevada Las Vegas, House Speaker John Boehner countered with a letter to the President asking him why he hadn't responded to their more recent proposal.  That letter, in turn, led Senate Majority Leader Harry Reid to counter with his own letter proposing using Republican-approved offsets, but also opening the door for a bi-partisan solution.  Now that each side has taken hits and scored points on the matter, it's possible that a real conversation could take place before end the end of June.  

To highlight the administration's commitment to lower the cost of attending college, President Obama also used his Las Vegas speech to promote his recent efforts to lessen borrowers' burdens in repaying their federal student loans.  Via a convoluted route that includes recent negotiated rule-making, the Department of Education is trying to move up increased eligibility for the income-based repayment (IBR) from 2014 to January 2013.  A Presidential Memorandum on this also included proposals to simplify the IBR application process through electronic importation of IRS tax information.

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Sarah Flanagan