Brace yourself, borrowers of federal student loans: On July 1 more than 7.4 million students with federal loans will see their interest rates double, from 3.4 percent to 6.8 percent — unless Congress steps in to keep them at the current rate. “For each year Congress allows the rate to double, the average student with these loans racks up an additional $1,000 in debt,” a White House official told The Root.
In a stab at keeping interest rates on student loans low, this week President Obama will start calling on Congress to stop the doubling of interest rates on multiple fronts.
On Friday he’ll enlist Education Secretary Arne Duncan in the White House Briefing Room to discuss the impending hike at a time when the number of student-loan borrowers is ever rising and, according to a study by the Consumer Financial Protection Bureau, the total outstanding student-loan debt is expected to hit a record $1 trillion this year.
The president will focus his weekly address on Saturday, and visits next week to the University of North Carolina at Chapel Hill and the University of Iowa, on urging Congress to pass legislation to prevent the loan hike.
In addition, the White House plans to launch a social media campaign on the issue using Twitter, Google+ and Facebook under the hashtag #DontDoubleMyRate.
Unlike Obama’s previous efforts around student-loan debt — like last October’s executive actions to speed up a measure that lets borrowers cap federal-student-loan payments at 10 percent of their income, and allowing some to consolidate multiple loans into one single payment — this interest-rate hike requires congressional approval. But given that the Congressional Budget Office (pdf) has estimated that a one-year freeze on the interest rate for subsidized Stafford loans would cost about $6 billion, legislators will likely consider it too expensive to actually pass (not to mention, from a Republican perspective, too youth-vote-friendly in this election year).
That would explain why the president’s focusing more on the students themselves rather than on appeals to Congress alone, in hopes that they’ll rally around the cause.
According to a White House official, “The president’s student-loan interest-rate push will continue throughout the spring and early summer, until Congress passes legislation to keep interest rates low and continues to give students the chance to get the college education they need for the jobs of today and tomorrow.”
Cynthia Gordy is The Root‘s Washington reporter.