"The Obama administration wants to finance an extension of the income-based payment plan and not tie it to deficit reduction," said Asher. "That's a significant difference. But again, there's no rate cap. Interestingly, the Republicans' variable rate proposal in the House does have a cap." The bill introduced by Rep. John Kline (R-MN) and Virginia Foxx (R-NC) caps all Stafford loans at 8.5%. The Reed-Harkin Senate bill has caps baked into the legislation: 3.4% for subsidized and 6.8% for unsubsidized Stafford loans.
"There have been arguments from Obama and the Republicans that having no cap is O.K., because we have income based repayment plans," said Asher. "But you see costs passed on to students even in income-based plans when rates rise."
In addition, Asher said the long-term proposals that she's seen are generally worse than letting rates double, which would include the Republican Coburn-Alexander bill that came out of the Senate and would cap rates for each individual loan. But rates could rise without limit, linked to the 10-year Treasury bill.
Meanwhile the card the Republicans continue to play links the Obama plan to their own--even if the similarities are misleading. In the face of a Senate logjam, this has some appeal.
In a June 21 letter to Obama, House Speaker John Boehner (R-OH) wrote, "Without your intervention, Senate Democrats are going to double interest rates for millions of
." He added, "
The House passed a plan that mirrors your own. The differences between the House plan and yours are minor
." He continued, "Unfortunately, they cannot be resolved if Senate Democrats refuse to even accept our shared approach and the need for a long-term solution."
Both sides seemed to favor sarcasm over solutions--not a good sign at this late date. "While we're glad House Republicans are paying attention to this looming problem this time around, the plan they passed doesn't solve it," said White House spokesperson Matt Lehrich. "In fact, a typical freshman could actually pay more under their plan than if Congress did nothing at all."
Rates jumped in 2006 when Republicans had control of the House and used increases as a part of a deficit reduction strategy. Democrats took back the House a year later and passed a bill introduced by Rep. George Miller (D-CA) that reduced rates for the next five years. That bill expired last year. Miller's Washington, DC press secretary for education, Tiffany Edwards, said, "We're calling on Republicans to reverse their vote that would result in the doubling of interest rates on July 1."