The 2012 fight over student loan interest rates escalated Friday as Education Secretary Arne Duncan used a White House event to go on the offensive against a rate hike while a senior House Republican blamed Democrats for “bad policy” that leaves Congress with a choice of raising rates or imposing new burdens on taxpayers.
Addressing the White House press corps, Duncan said the interest rates—set to increase from 3.4 to 6.8 percent this July—will add $1,000 to the average cost of loans for students. More than 7 million families would face the increase when they take out new loans this fall, the secretary said.
“College has never been more important, but it’s never been more expensive,” Duncan said. Of the pending rate increase, he said, “We need to fix this now.”
The education secretary said he has seen disturbing signs that some young people no longer believe in the value of college in the current economy. Yet jobs requiring a college degree are growing, he said, while employers are seeking skilled workers with some post-high-school education.
“Many people are beginning to think college isn’t for them,” Duncan said at the daily White House press briefing. Yet, employers say they have 2 million high-wage, high-skill jobs that are going unfilled due to a lack of qualified candidates. “We need a lot more people going to college and graduating,” he said.
Duncan said President Obama is going on the road next week to urge Congress not to raise rates. “We need to deal with the immediate issue right now,” he said.
Yet, Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, blamed Democrats for the current crisis. He said Democrats in 2006 promised to cut interest rates in half and did so after gaining control of Congress in 2007, but the fix remained temporary due to its high costs.
“Bad policy based on lofty campaign promises has put us in an untenable situation,” Kline said.
Extending the low rate for just one year will cost $6 billion, according to the Congressional Budget Office.
“I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run,” Kline said.
But Duncan noted that the 3.4-percent interest rate plan “passed in 2007 with broad bipartisan support and was signed by a Republican president”—former President George W. Bush. Since that time, Duncan noted, student loan debt has risen to a level where it now is larger than Americans’ average credit card debt.
Kline also criticized the White House for failing to outline a “meaningful” solution to pay for continued low interest rates. Duncan said the president will offer more proposals this week, while Kline said Republicans are “exploring options in hopes of finding a responsible solution” for students and taxpayers.
Although student debt now surpasses credit card debt, Duncan insisted that student loans are a good investment in a person’s future—provided the debt is manageable.
“If we want to keep jobs in this country, we have to have an educated workforce,” Duncan said. “When young people are thinking they might not go to college,” he added, “that’s not good for our country.”