Everything you need to know about the politics of the student loan fight

July 1, 2013

The interest rate on a widely utilized student loan doubled Monday after lawmakers on Capitol Hill failed to reach a deal to keep them from rising.

How did Congress get to this point? And what's next? Below we dig into the politics of this fight to address these questions and more.

(And be sure to check out two must-reads on this topic. One is an excellent explainer Wonkblog's Dylan Matthews wrote last month, which provides a very thorough explanation of the various policies lawmakers are putting forth and what they would mean. The second must-read is The Post's Nick Anderson's mainbar story from Monday morning.)

So which student loan are we talking about here?


(Andrew Harrer/Bloomberg)

At issue are subsidized Stafford loans. These are loans given to college students who demonstrate financial need. The government pays the student's interest while they are in school, for six months after graduation, and during a deferment period.

The interest rate on these loans is doubling from 3.4 percent to 6.8 percent. It's important to note that loans taken out before Monday are not affected.

Could Congress and President Obama have prevented this?

Yes. Lawmakers have known for a year that they would need to act to prevent rates from going up. Congress passed a bill that Obama signed a year ago to freeze rates for a year, starting a new clock for Congress to come to an accord again.

So what happened?


A traffic jam. (Beawiharta/Reuters)

In a word: gridlock. Like a lot of things in Congress, partisan disagreements prevented lawmakers from reaching an accord. House Republicans passed a plan that would allow loan rates to fluctuate from year to year based on the government's borrowing cost. The Obama administration threatened to veto it, and it never advanced.

Over in the Senate, a motion to move ahead with a Democratic plan to freeze rates didn't win the 60 votes it needed to overcome a GOP filibuster. And an effort to advance a Republican plan to tie rates to establish market-based rates on various loans also fell short. Meanwhile, Obama proposed his own plan.

There have been no shortage of plans, just a lack of agreement over which one is best.

So if Congress and the president did it last year, why couldn't they strike a deal this year?


A voting booth. (Patrick Kane/AP)

One factor is that 2012 was an election year. Mitt Romney, Obama and Congress wanted to freeze rates. No one wanted to allow the opposition to blame them for a failure to get a deal done with young voters headed to the polls that fall. This year, the same electoral pressures are not there.

So who is playing the blame game?


(Mark Wilson/Getty Images)

Both sides are trying to go on offense on the campaign trail. House Republicans' campaign arm has targeted Democrats who voted against the House GOP plan, charging that those lawmakers rejected a "common-sense proposal." House Democrats' campaign arm has taken out ads in student newspapers targeting Republicans who voted for the GOP plan, which Democrats have cast as as a bigger burden on college graduates with loan debt.

What's next?


Sen. Jack Reed (D-R.I.) talks about student loans while flanked by Sens. Kay Hagan (D-N.C.), left,  Debbie Stabenow (D-Mich.), Elizabeth Warren (D-Mass.), Al Franken (D-Minn.), and Tom Harkin (D-Iowa) during a news conference on Capitol Hill on  June 27 in Washington. (Mark Wilson/Getty Images)

It's hard to say, because there is no clear path to resolving the matter. Sen. Debbie Stabenow (D-Mich.) is spearheading a Democratic bill she has said will come to a vote July 10 that would freeze rates for a year. Meanwhile, a bipartisan coalition of Sens. Joe Manchin (D-W.Va.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.), Lamar Alexander (R-Tenn.) and Angus King (I-Maine) has offered its own plan for a long-term solution.

Whatever passes the Senate must also clear the GOP-controlled House, which in its view has offered up a feasible proposal. So the bottom line is there are more questions than answers at this point about where the debate goes from here.

Sean Sullivan covers national politics for “The Fix.”
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Chris Cillizza | July 1, 2013