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Education & Labor Committee Republicans

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Left Turn: President Revives Failed Campaign Promises on Student Loan Interest Rates

WASHINGTON, D.C. – During the State of the Union address, President Obama called on Congress to prevent an increase in student loan interest rates from hitting students, stating, “At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July.”

While we all agree on the importance of keeping college affordable and providing relief to student loan borrowers, we must ask ourselves: how did we get ourselves into a situation where student loan interest rates will suddenly double? Let’s take a look at the reality behind the president’s rhetoric.

FACT: Five years ago, Democrats chose temporary relief over lasting solutions on college costs.

In 2006, Democrats made a series of campaign promises to the American people, including a pledge to make college “affordable and accessible to all.” After gaining control of Congress in 2007, then-Speaker Nancy Pelosi (D-CA) and Rep. George Miller (D-CA) championed the College Cost Reduction and Access Act, legislation they claimed would cut student loan interest in half and “break down financial barriers that prevent too many students from pursuing higher education.”

As it turned out, Democrats could not figure out how to pay for a permanent reduction in interest rates, so the legislation only temporarily phased down student loan interest rates for four years, at which point the rate would jump back up to the higher level.

Instead of working with Republicans on responsible solutions that would help make higher education more affordable for students in the long run, the Democrat Congress chose to make false promises to borrowers and kick the can down the road.

FACT: Democrats ignored Republican warnings about the consequences of enacting unsustainable changes to the student loan industry.

Democrats claimed their legislation would provide relief to student loan holders with no new cost to taxpayers, but Republicans saw the legislation for what it really was: a Trojan Horse for new spending at the long-term expense of taxpayers. As former Education and the Workforce Committee Ranking Member Howard P. “Buck” McKeon (R-CA) said during debate on the legislation, “What once was a campaign promise has become a trap that will ensnare either students or taxpayers, and possibly both.”

We now face the exact predicament we expected: we must either allow interest rates to rise on student loans, or stick taxpayers with another multi-billion dollar bill. According to an article published in Inside Higher Ed, extending the low interest rate for just one additional year could cost taxpayers as much as $5 billion.

FACT: Real solutions are needed to address college costs.

Real solutions are needed to address the problem of rising college costs, not more short-term band-aids. House Committee on Education and the Workforce Republicans have called on leaders in higher education to continue exploring ways to ensure a more affordable college education remains available for American students.

Additionally, we continue to support increased transparency in the reporting of college costs while working to remove burdensome federal regulations that could impose higher costs on postsecondary institutions.

As President Obama rightly said in his State of the Union address, “We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money.” At a time when our national debt has already surpassed a whopping $15 trillion, many would argue that day has already come. The president should work with Republicans and Democrats in Congress to enact meaningful reforms that improve higher education transparency and reduce unnecessary regulation.

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