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Student Loan Interest Rates – An Interesting Campaign Issue For 2012

If there is one thing I have learned from reading and writing about politics and political campaigns, it is that one can never predict what issue may become a hot topic for a particular campaign. Such is the case of the debate over student loan interest rates. From out of the blue, it seems to have raised its head as one of the important issues of the 2012 elections. This is true for both the presidential and congressional elections. It really shouldn’t come as a surprise, given the fact that college students are a prime target for fresh votes for a political campaign. Here on Political Realities, I strive to be objective and to write about the realities that are inherent in all things political. This is one of those times when those realities are coming to a head, right before one of the most important elections this country has ever conducted.

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student loan interest ratesAt issue is not whether student loan interest rates will double. They will do so, if an extension to a bill already in place isn’t passed. Student loan interest rates are artificially low because of this legislation, put into place by the Democratic leadership in Congress in 2007. As it is with too much of the legislation passed through Congress, this has an expiration date built into the bill. So now, both political parties are scrambling, trying to one up each other and claim credit for keeping student loan interest rates low.

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President Obama has been traveling around the country, visiting college campuses, and making sure the students know he is on their side. It should be noted, however, that Senator Barack Obama couldn’t be bothered to leave the campaign trail and cast his vote when this first came through Congress in 2007. It seems to have gained some importance for him since then. I wonder why?

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So, if everyone agrees that student loan interest rates need to be kept low, what’s the problem? It’s pretty simple, actually. The real issue that has brought this issue to the front of the campaign is how it will be paid for. Ah, now we know the rest of the story. It’s all about the money and where it will come from. I’ll let Jamie Dupree take it from here.

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Both parties are for the same thing – not letting those interest rates double; but how they pay for it – and how they get there is a reminder of our current political deadlock.

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Democrats want to strip tax breaks away from the oil and gas industry, something Republicans have repeatedly rejected during President Obama’s time in office.

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“They’re priority is to protect subsidies for Big Oil,” said House Democratic Leader Nancy Pelosi.

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The Republican response was straight out of their political playbook – go after the Obama health law.

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“We will pay for this by taking money for this from one of the slush funds in the president’s health care law,” said Speaker John Boehner.

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And so, the two parties are locked in their corners on a $6 billion measure to deal with the student loan interest rate increase – those rates would double in July.

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As with anything, it is important for us to look at the history of a particular issue. We have already revisited the fact that the Democrats are the ones responsible for setting this July deadline. But wait, there’s more. What about the slush fund John Boehner mentioned? As it turns out, the money to extend the low student loan interest rates was supposed to be available, but it was diverted for other projects. Here are some of the details, from Fox News.

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The GOP’s Student Interest Rate Reduction Act would take some of the estimated $9 billion Democrats diverted from college financial aid funding in 2010 to pay for the president’s health care law and apply the money as a stopgap measure to prevent the rate increase.

The money, more specifically, created the Prevention and Public Health Fund for prevention, wellness and public-health activities. It is administered by Secretary of Health and Human Services Kathleen Sebelius, who has full discretion on how to spend the money.

The political reality of this issue is simple. The Democrats set this up in 2007 and then took some of the money involved and used it to fund certain portions of Obamacare. The Republicans are trying to retrieve that money and use it for its intended purpose. The Democrats are using this as another excuse to punish the evil and rich oil companies by stripping the subsidies they receive from the government. At the same time, they are using it as an attack on the Republicans for protecting those evil and rich oil companies. In other words, it’s the same song and dance we have been hearing for over three years. Nothing has really changed, except the issue being used for political purposes. I can’t help but wonder which issue will be moved to the front of the campaign, once the student loan interest rates are settled into place.

About LD Jackson

LD Jackson has written 2053 posts in this blog.

Founder and author of the political and news commentary blog Political Realities. I have always loved to write, but never have I felt my writing was more important than in this present day. If I have changed one mind or impressed one American about the direction our country is headed, then I will consider my endeavors a success. I take the tag line on this blog very seriously. Above all else, in search of the truth.

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  • I’d be very surprised if any news outlet other than Fox were to report the truth, that the funding was there to begin with, but was taken from student loan funding by the Democrats themselves.

    I’m highly suspicious of the planned timing of this expiration. Four months before an election? I smell political planning aimed at getting votes from college students, most new to the voting ranks.

    On another note, I don’t believe our government should be in the student loan business. With over $1 trillion in outstanding student loan debt, and a lot of it to end up in default, this is nothing more than a transfer of wealth. Tax dollars should not be used to pay for people to go to college. That’s transferring the financial burden to everyone, including those who chose not to go. I’ve seen plenty of these students, either still in college or just out, complaining about massive debt they’ve incurred. I want so badly to ask them who put a gun to their head and told them to take out the loan.

    • I agree that the timing of this is not an accident. Obama will use this to buy young voters. Most of them already buy into the anti-oil crap, so they will be all over this idea to make them pay for their debt.

      I am a 29 years old and I have over $25,000 in loans remaining. No one held a gun to my head and no one is responsible for them other than myself. I wish I had been introduced to Dave Ramsey prior to taking the loans, but I wasn’t. It’s too late to not take the loans, so instead, I am focusing all my energy to paying them off ahead of time. Unfortunately, I don’t think this is the general attitude of most people with loans or taking loans.

      By the way, taking more loans than you need is easy to do and is commonplace. I was always offered more than what it would take to cover tuition. You could then use that money to buy whatever gadgets and other junk you wanted.

      Dave Ramsey’s tweet from yesterday…”Students protesting student loan debt. Note: Don’t protest your own stupidity, makes you looks exponentially stupid.”

      • That’s a good quote from Dave Ramsey. He has a way of cutting right to the crux of an issue. He is very blunt, but he also knows what he is talking about.

    • I wholeheartedly agree with you, Charles. The student loan business is another area where our government has inserted itself, but has no business being there. There is entirely too much artificial influence over a lot of areas that is the direct result of government intervention.

      I have heard some students myself, explaining how much money they owed on their loans. Some of them were bemoaning the debt, while others seemed to be proud of it.

  • lou222

    LD, he is just dangling the carrot with these students. Whatever happened to just working while you were in school to pay for your classes as you take them? That is what I did, most everyone I knew did that unless they had the really rich parents. Then the parents paid for those kids to pretty much party, make bad grades and drop classes. I did not have that pleasure to not succeed and have my parents take the hit as these students did. I wanted grades not a withdrawal showing. Sorry, back to the issue at hand….to take money out of the fund for “other” things is what the Dems do best. As big of a mess that Obamacare is, well that is even worse to apply it there. They think no one is paying attention, but that is not the case now, is it? When I heard the government was taking over on student loans, I made a mental note to myself that this was probably not a good idea. Guess Obama loves the idea and can become best buddies with those students now. We can only hope the students see thru this.

    • This is certainly a political ploy that has been set up by the Democrats. Robbing Peter to pay Paul and making Peter pay it back. I’m with you about the students. I really hope enough of them can see through this for what it is.

      Concerning your comment about what you witnessed while you were in school, I saw pretty much the same thing. Many students were there, only because they and their parents wanted them out of the house. Most of them seemed more interested in getting drunk or creating mischief, than they were in going to class and getting good grades. All of us would have been better off if they had stayed at home.

  • Low student interest rates come with two problems. They artificially make the value of education appear greater than it is and they encourage schools to increases prices and/or add students and thus quick, easy revenue. These little fools start college at 18, paying nothing out of pocket, think nothing of the price increases or the lack of value for their money. It isn’t until they graduate that they start whining about how much they owe. Then they want Obama to bail them out of their own stupidity.

    I had a friend a decade ago who graduated with nearly a quarter million in debt between undergrad and law school. My friend couldn’t find a job for nearly a year and then took a low paying job as a public defender. She’ll have those student debts the rest of her life, it’s sad. Even sadder is that today between tuition, room and board she would walk away with half a million in debt upon law school graduation. No education is worth that kind of debt. But you’ll never hear that from the university welfare queens (aka administrators) or Democrats.

    • That is a shame, Steven. For years, our government has been determined to get more people out of high school and into college. They seem to think that is the key to success and many employers won’t even consider you for a job, unless you have at least four years of college. Some require more than that. It’s sad, because those years of college do not necessarily mean a job applicant is qualified for a particular job.

      Then, you have situations such as your friend. She started off so far in the hole that she will probably never dig herself out.

      Personally, I think education in our country should shift its focus. So much emphasis is placed on math, science, and other related topics, and I believe that is a mistake. I believe it should be focused more on a skill set, training, etc. But, I am digressing from the point of this post and besides, this little rabbit trail could be the source of different post altogether.

      • That might not be a bad topic for a post. Higher education used to be about higher learning but it isn’t anymore. It’s about maintaining and expanding the gravy train. It started with the GI Bill, which infused millions into schools after WWII. Then it was pell grants and other Federal scholarships, now it’s student loans. A true higher education has become secondary to suckling off the government teet. It’s the perfect set up really, who would dare attack the golden calf of education?

  • This vote pandering by both sides. Student loans is just another bubble that’s going to burst and the taxpayers will take the hit.

  • One thing I read that was interesting was that by offering these low interest loans in a way the Government is creating an artificial market for college students allowing more to go and for schools to get all the tuition they charge which then encourages them to raise their tuition higher and higher and also pay professors more.

    Basically, the ease of low interest loans inflates college prices.

    • It’s a vicious cycle, if you ask me. And so many people wonder and marvel at the cost of a college education? It seems fairly plain to me that it is a direct result of our government inserting its influence into areas where it has no business.