Is that the sound of Congress . . . working?
Lawmakers haven’t agreed on much lately. This split House and Senate have voted on a lot of legislation, but they have passed very little. Yet lawmakers are on the verge of approving a compromise on a real issue — student loans — and in both houses. Even better, the policy is pretty good. How did this happen?
On the campaign trail last year, President Obama railed about extending a subsidized student loan interest rate that Congress had temporarily set at 3.4 percent, a figure that resulted from a 2006 Democratic campaign gimmick, as though that arbitrary number was the key to college affordability. (And it’s not.)
But in his budget plan this year, Obama removed the agitprop. Instead of another extension, the president proposed linking student loan interest rates to the rate at which the government borrows, plus a relatively small markup to offset some of the risk the government takes when it lends to 18-year-olds who don’t have credit histories. Student loan interest rates would better reflect economic reality, instead of Congress’s whim. Republicans in the House agreed, and the parties hashed out the remaining differences in the Senate this week. Though imperfect in some details, the resulting policy is fairer, it is fiscally defensible, and it is permanent.
Both parties have used student loan rate policy as a political weapon in recent years, each attempting to claim that it cares more about middle-class families than the other. Why did they disarm?
Though certainly politicized, student loan policy isn’t a do-not-cross issue to a degree that, say, Obamacare is for Republicans. Rubicons could be forded in pursuit of good policy.
Part of the reason for that is good timing. Market interest rates are very low right now. There will be no overnight sticker shock associated with moving to the new, better policy, which will provide educational loans to undergraduates in the coming school year at a rate of less than 4 percent. Critics can only point to the possibility that rates will move higher sometime in the future, not an assured, quantifiable rate increase anytime soon.
But a huge factor was the president’s leadership. Instead of giving in to political temptation like last year, Obama proposed something better, a good idea that Republicans could get behind, and one that wasn’t comfortable for the brassier voices in his party. Some Democrats in Congress have been skeptical of linking student loans to any rate-based on markets, rather than politics, cooked-up numbers floating around Capitol Hill or both. The president’s proposal made their strident rhetoric less acceptable, and compromise outside the boundaries of previous partisan debate more so. It gave political space for other Democrats and Republicans to agree.
There may just be a lesson here.