NEW YORK (MainStreet)President Barack Obama has come to a fork in the road on student loans. It appears that he's decided to take it.
Borrowing a line from catcher-cum-philosopher Yogi Berra, Obama called a threatened rate hike on Stafford loans "déjà vu all over again" at a ceremony in the White House Rose Garden last Friday. Currently held by 7.4 million students, Stafford loans subsidized by the federal government are scheduled to jump from 3.4% to 6.8% on July 1 after a 2011 increase was deferred in an election year deal between Obama and then-candidate Mitt Romney.
Obama also criticized a House Republican bill that would tie variable rates for student loans to rates for the Ten-year Treasury bill. Republicans say that the difference between the House bill and Obama's are too close to calland should be an opportunity for a bi-partisan compromise. The main sticking point seems to be managing a rate rise.
"The difference between the House plan and the president's plan are small, and there's no reason they can't be overcome quickly," said House speaker John Boehner in a statement released on Friday. "But today, rather than working to resolve the issue, the president resorted to a campaign stunt to try to score political points."Also see: Obama's New Student Financial Tool: Does it Matter
Obama used the occasion call out Republicans and seemed more critical of the GOP plan than he has been recently. But his plan is less student-friendly than others coming out of the Senate, such as Also see: Student Loan Bill from Sen. Elizabeth Warren Gains Traction the Sen. Elizabeth Warren (D-MA) proposal to tie the loans to the fed funds rate, currently about 0.75%. Obama and House Republicans disagree over whether rates should be variable or fixed and whether they should be capped. The bill passed in May by House Republicans would let rates reset each year based on the 10-year T-bill rate plus 2.5%. Obama's plan would track T-bills plus 0.9%. The GOP also wants to cap Stafford rates at 8.5%. The Republican plan for PLUS loans available to graduate students would be the Ten-year T-bill plus 4.5%, with a cap of 10.5%.