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Obama signs bill extending lower student loan rates for one year

By Steve Zoski, Daily News Editor
Published July 12, 2012

President Barack Obama has spoken about making college more affordable, delivering financial aid reform and protecting students from student loan interest rate increases throughout this election year.

On July 6, Obama signed a bill that, in addition to authorizing $100 billion in funding for transportation projects, will direct $6.7 billion to delay the increase of the rate on subsidized Stafford student loans for undergraduates from 3.4 percent to 6.8 percent interest for one year.

The bill came to Obama’s desk after passing the Senate 74-19 and the House 373-52. No Democrats voted against the legislation, which was also supported by Republicans.

According to USA Today, before he signed legislation extending the lower rate for one year, Obama had to sign a one-week extension on June 29. If congress hadn’t created legislation to extend the rate, it would have reverted to the 6.8-percent rate. Graduate students and undergraduates with unsubsidized student loans already pay the 6.8-percent rate.

According to The New York Times, the rate had been at 6.8 percent until 2007, when legislation reduced the rate to 3.4 percent until a July 1, 2012 deadline.

The New York Times added that congressional Democrats had introduced the legislation in 2007 to bring the rate to 3.4 percent with low- and middle-income undergraduates in mind.

Throughout the past year, both Obama and University President Mary Sue Coleman discussed the value of making higher education more affordable for students.

Last December, an open letter that Coleman sent to Obama calling for affordable higher education was released to the public. Obama then addressed the need for college affordability in his State of the Union address on Jan. 24.

In the speech, Obama said college affordability is vital.

“Higher education can’t be a luxury — it is an economic imperative that every family in America should be able to afford,” Obama said.

Three days later on Jan. 27, Obama spoke at the University’s Al Glick Field House, where he called for financial aid reform.

Coleman issued a press release in support of Obama’s remarks regarding higher education in his State of the Union address, then appeared alongside Obama during his visit to the University.

On April 24, Obama held a conference call from Air Force One with reporters from various college newspapers in which he called for students to get engaged and be vocal about stopping student loan interest rates from doubling.

In the conference call, Obama, who noted that he and his wife remember their experience paying their own student loans, said student loan debt continues to grow.

“For the first time now, we’ve got Americans owing more debt on their student loans than they do on their credit cards,” Obama said.

In the conference call, Obama warned that the Stafford rates were due to double to 6.8 percent by July if students didn’t make their voices heard, adding that the issue has “never been more important.”

According to CNN, when he signed the one-year extension last week, Obama said he hoped the bipartisanship that contributed to the bill’s passage would continue.

“ ‘This is an outstanding piece of business, and I’m very appreciative of the hard work that Congress has done on it. My hope is that this bipartisan spirit spills over into the next phase,’ Obama said, encouraging members to pass larger infrastructure measures and ‘start doing more to reduce the debt burden that our young people are experiencing,’ ” CNN reported.

Furthermore, the Associated Press reported that White House senior adviser David Plouffe sent an e-mail in which he thanked Americans for putting pressure on Congress.

“You took to Twitter and Facebook. You sent emails and talked to your friends and neighbors. And in the end, your voices made all the difference,” Plouffe wrote.

In an interview, Business senior Manish Parikh, president of the University’s Central Student Government, said the extension is a victory for college students, adding that they helped make the extension possible by taking control of their own issue.

“The president kicked off this whole tour of college affordability at the University of Michigan on January 27 and countless University of Michigan students have taken to Facebook and Twitter and written to their congressmen and elected officials and media to discuss this whole issue and the previous situation of rising college interest rates,” Parikh said. “But the students here are the real victors and the real ones who made this happen.”

Parikh said he was glad the extension would help save many University students nearly $1000 this year. But he said measures to make college more affordable are as pressing as ever, noting that many University students already have debt.

“The average University of Michigan student is accruing $27,828 of average debt when (they) graduate,” Parikh said.

Parikh added that he would like to see the issue resolved on a longer-term basis so debate over extending the rates doesn’t need to happen year after year.

“Stafford loan interest rates should be permanently kept at the low level of 3.4 percent, as opposed to these low rate-shaving to be renewed on a yearly basis, without which they will double,” Parikh said. “The real discussion regarding these interest rates we should be having is about further reducing them, rather than discussing the possibility of raising them.”

In an e-mail to The Michigan Daily, LSA junior Lauren Coffman, the communications director for the University’s chapter of the College Democrats, wrote that she was displeased that Republicans made deliberation over the bill take this long, but added that the bipartisanship shown was a promising sign for students.

“It’s unfortunate that Congressional Republicans allowed us to get to the point that not passing the bill was a concern, but it is promising to see legislators from both sides of the aisle coming together to do what’s best for students,” Coffman wrote.

Coffman added that she hopes the bill is only the start of reforms from the President, if re-elected, as well as increased awareness toward making college more affordable.

“Hopefully this bill will lead to increased awareness of student debt, and reforms which will give recent graduates more freedom to pursue career opportunities that could greatly improve the quality of life for our nation’s citizens,” Coffman wrote. “The president is acutely aware of the toll that student debt can take, having recently paid off his own student loans, and I'm sure we'll see more of his dedication to increased access to education throughout the campaign season.”

In an interview, LSA senior Rachel Jankowski, chair of the University’s chapter of the College Republicans, said it was good to see higher education as a priority, but added that the legislation isn’t fixing the actual problem.

“I think it’s great that we worked together — both Democrats and Republicans — to pass the bill, especially on something as important as education,” Jankowski said. “But I think the reason why a lot of Republicans may not have been completely for it is because it doesn’t really do much to address the cost of tuition.”

Jankowski added that the cost of education continues to rise and said subsidizing interest rates isn’t going to fix the rise of higher education.

“It’s incredibly short-term, and eventually those interest rates are going to most likely go up again because you can only sustain that for so long and you still have the underlying issue, so it really does nothing to solve the actual problem.”

In an e-mail to the Daily, Pamela Fowler, executive director of the University’s Office of Financial Aid, said University students will benefit from the legislation.

“We had estimated the average student, who borrows each year for an undergraduate degree and repays that loan over the standard 10-year repayment period, would have paid $1,000 more in interest if the legislation had not gone forward. Saving $1,000 over 10 years will mean a lot to our students,” Fowler wrote. “Let’s hope we can get long-term interest rate relief for students — and soon.”

-Editor in Chief Jacob Axelrad contributed to this report.