The next act in the student loan fight: Offsetting the cost of lower rates
President Obama thinks Congress should pass a measure extending the current low interest rates on federal student loans.
On Monday, Mitt Romney announced that he agrees.
So, case closed, right?
Agreeing on an extension is only the first part of the debate. The second part – how to pay the cost of an extension – is where the real battle comes in.
On Monday, the presumptive Republican presidential nominee announced in a statement that he supports paying for – or offsetting – the estimated $6 billion cost of extending the current 3.4 percent Stafford loan rate through spending cuts elsewhere in the federal budget.
“Given the bleak job prospects that young Americans coming out of college face today, I encourage the Congress to temporarily extend the current low rate on subsidized undergraduate Stafford loans,” Romney said. “I also hope the president and Congress can pass the extension responsibly, that offsets its cost in a way that doesn’t harm the job prospects of young Americans.”
Details on how to proceed are elusive, however.
Romney’s camp did not give any specifics on the type of offset that Romney would like to see Congress enact. A campaign spokeswoman did not immediately respond to a request for comment on Tuesday.
House Republicans, led by Education and Workforce Committee Chairman John Kline (R-Minn.), have begun working on a student loan measure, although details of any proposed offsets have yet to be finalized.
The White House and congressional Democrats are also looking at ways to offset the cost of extending the loan rates.
One is a measure that would do away with a tax provision that critics argue has served as a loophole for some small business owners, The Wall Street Journal’s Carol E. Lee and John D. McKinnon reported Monday night. A House Democratic leadership aide confirmed Tuesday that House Democrats are working together with the White House and Senate Democrats on a revised bill.
The aide, who was not authorized to speak publicly about the talks, also noted that Democrats’ alternative to the 2013 budget blueprint authored by House Budget Committee Chairman Paul Ryan (R-Wis.) – unveiled last month -- included a provision that would offset the cost of extending the rates.
Could the student loan fight become the next payroll tax battle? Quite possibly – particularly since the White House is going into full campaign mode on the issue, with Obama visiting three college campuses this week to call for Congress to pass an extension of the current rates.
What’s different this time around is that the student loan issue will be the first major spending debate to play out with a presumptive Republican presidential nominee waiting in the wings. How congressional Republicans – who were of two minds when it came to the payroll fight -- decide to resolve the differences on the loan rate legislation among their conference could have a significant impact on Romney’s fortunes on the campaign trail.
In a Romney campaign conference call Tuesday morning, Rep. Aaron Schock (R-Ill.), the youngest sitting House member, argued that Romney’s campaign is focused on young voters and said that he personally, like Romney, backs an extension as “the responsible thing to do right now.”
And while Schock stressed that Congress will “need to offset the expense,” he declined to “speak for 240 Republicans until we have a chance to debate it amongst ourselves.”
“We’ll see what kind of support or opposition there is to it. ... If can come up with pay-fors, it’ll be a lot easier to get people to support it that would not otherwise be inclined to, and people will hear from their young people that are struggling for work,” he said. “This is real life for these young people.”
Another factor in the calculus: Congress has until July 1 to pass a rate extension. That means that, if both sides don’t come to an agreement in the short-term– as often is the case on Capitol Hill -- this week’s White House offensive could be only the beginning of a months-long student loan battle.