As President Obama continued his tour of swing-state colleges Wednesday, parties in both chambers of Congress offered legislation to keep student-loan interest rates low past the November election.
Without action by Congress, the interest rate on new subsidized Stafford loans to undergraduate students will double, from 3.4 percent to 6.8 percent, on July 1.
The first bill came from Senate Democrats, who introduced legislation to extend the lower Stafford interest rates for one year. In a move sure to rankle Republicans, the legislation would offset the cost of lowering the rates by tightening the way payroll-tax rules apply to so-called S corporations, which tend to be small, privately held companies. Current law allows some owners of S corporations who are also employees to take their pay as dividends, rather than salaries that are subject to Social Security and Medicare taxes.
House Democrats followed quickly, with a bill that would pay for the one-year freeze by cutting subsidies to oil companies.
Not to be outdone, Republicans in the House and Senate offered a plan that would draw money from a fund to help prevent chronic disease that is included in the president's health-care law.
The flurry of activity came as President Obama was visiting the University of Iowa, his third campus stop this week. On Tuesday, he spoke at the University of North Carolina at Chapel Hill and the University of Colorado at Boulder, and at both destinations he called on Congress to keep student-loan interest rates low for another year.
The interest-rate problem stems from 2007, when Congress voted—with bipartisan support—to cut the interest rate on subsidized Stafford loans in half by 2011, from 6.8 percent to 3.4 percent. That cost an estimated $7.2-billion from 2007 to 2012, a total that was absorbed almost entirely by lenders and loan-guarantee agencies, according to the Congressional Budget Office.
The Department of Education has estimated that the expiration of the lower interest rate on July 1 would affect seven million student-loan borrowers and would cost borrowers $1,000 over the life of each loan. A one-year extension of the lower Stafford interest rate would cost $6-billion, the Congressional Budget Office estimates.
In the years since the original interest-rate cut was enacted, student-loan debt has burgeoned, nearing the $1-trillion mark and exceeding the nation's total credit-card debt for the first time. Student debt has also grown as an issue, gaining importance as college costs have continued to rise and a sluggish economy has failed to produce jobs for many college graduates.
The issue has been particularly potent among young people and is a key concern of Occupy-movement protesters. The Occupy Student Debt Campaign organized protests around the country on Wednesday to mark what the group estimated would be the day U.S. student debt reached $1-trillion. And in March college students delivered 130,000 letters to Congressional leaders to protest the expiration of the lower interest rate.
In his speeches on the three campuses, Mr. Obama reiterated that keeping student-loan interest rates low should not be a partisan issue. Still, he used the issue to draw comparisons between himself and his presumptive GOP opponent, the former Massachusetts governor Mitt Romney.
"We didn't come from well-to-do backgrounds. We didn't have famous families," Mr. Obama said of himself and the first lady in his speech in Boulder on Tuesday night. "Michelle and I, we know about this firsthand. This is not something I read in a briefing book."
Mr. Romney's father, George W. Romney, was president of the carmaker American Motors and later governor of Michigan. He sought the GOP nomination for the presidency in 1968.
Mr. Obama also alluded to remarks by Rep. Virginia Foxx, Republican of North Carolina, who has said that she has "little tolerance" for students who rack up large amounts of loan debt. The quote drew boos from college students in both Colorado and North Carolina.
To the surprise of some members of his party, Mitt Romney also expressed support for extending the lower interest rate. At an appearance in Pennsylvania on Tuesday, Mr. Romney backed the effort, saying his support was partially because of "the extraordinarily poor conditions in the job market."
Neal McCluskey, a higher-education analyst with the libertarian Cato Institute, said the message of the president's college tour was intended to reach not only students but also middle-class voters worried about the rising cost of tuition. "Although the president's tour is supposedly about just policy, there's no question it's also campaigning," he said.
The Obama campaign is focused more than ever on galvanizing the youth vote for the November election, and so far it has had some apparent success. A recent poll released by the Harvard Institute of Politics found America's 18- to 29-year-old voters favor the president over Mr. Romney by a 17-point margin, a gain of six percentage points since late November. The poll also found that a majority of young people now predict the president will win re-election. Four months ago a greater portion of the group believed he would lose.
The Senate minority leader, Mitch McConnell, Republican of Kentucky, said in a speech on the chamber's floor Wednesday that members of his party do not want the rates to double, and he slammed the president for his speaking tour of campuses.
"If the president was more interested in solving this problem than in hearing the sound of his own voice or the applause of college students, all he'd have to do is pick up the phone and work it out with Congress," he said. "The only question is how to pay for it."