Political Game: Student Loan Interest Rate

1)

In today’s weak job market, about 50% of college graduates are unemployed or underemployed. Young graduates have often taken lower-wage jobs to get by while searching for opportunities that are more lined up with their degrees. Based on Labor Department reports, about 1.5 million53.6%—of people under the age of 25 with a bachelor degree were either unemployed or underemployed in 2011.

President Obama, who won the 18-to-29-year-olds in 2008 presidential election by 34% margin, knew his campaign this year will have a harder time to win the young votes in an economy that has been fragile since the end of the recession in mid-2009. And with the interest rate is set to go up to 6.8% (from current 3.4%) in July, on 4/24/2012, President Obama seized an opportunity to reach out to the young voters in college campuses in North Carolina and Colorado to let them know that he wanted Congress to act quickly to extend the low interest rate further. He told the students that their loan would go up $1000 unless Congress acted quickly. Obama asked a crowd of students: “Now, let me see. I’ll do a quick poll. … How many people can afford to pay an extra $1,000 right now?

What he failed to understand—or chose to ignore—was that the 6.4% rate applies to new loans taken after June 30 and not existing loans.

For the record, Republican Presidential hopeful Mitt Romney also agreed that Congress should act to extend the low interest rate of 3.4%. And for the record, the Congressional Budget Office estimated that the cost for freezing the interest rate at 3.4% is about $6 billion a year.

2)

Quickly, the House of Representatives passed a bill to keep the student loan interest rate at 3.4%—by a vote of 215-195. Both Republicans and Democrats—finally!—agreed that the interest rate should not rise. Not exactly! What they did not see eye-to-eye was how to pay for the cost—White House threatened to veto the bill passed by the House. Republicans wanted to pay for the cost by cutting spending from the Prevention and Public Health Fund—the same fund that the Democrat took $4 billion from in January to cover other expenses anyway. Pelosi and House Democrats wanted to pay with raising tax revenues by higher taxes on oil companies knowing very well that the Republicans would not agree to any higher taxes.

In the Senate, the Republicans offered a bill with the same language of the House’s bill while Harry Reid and the Democrats introduced a bill that would raise taxes on small businesses. Reid decided not to bring either bill on the floor to vote on before sending Senators home for a 10-day vacation.

3)

Once again, Obama and Senate Democrats are playing game in an election year. Instead of real commitment to a resolution, they will settle for blaming the Republicans as obstructionists.

Instead of a presenting a sound plan for the future to earn votes from young adults, Obama and Democrats chose to play “who-can-dole-out-the-most-freebies” game—one that Obama and Democrats excel at.

Instead of working on the economy and improve the job market—so that jobs will be available for these students and the current unemployed/underemployed college graduates—Obama and Democrats continue to play “Republicans as the defenders of the rich” game while they refuse to realize that raising taxes will discourage investments and slow job growths further.

Have we had enough? Have you had enough?

Ch3 Nguyen

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