Obama: Student Loan Rate Hike Would Be 'Tremendous Blow'

Susan Walsh/AP Photo

President Obama is teeing up interest rates on federal student loans as the new focus of his election-year drive to draw contrasts with Republicans.

In his weekly address, Obama says he will embark on a public campaign over the next few weeks to pressure lawmakers to act to keep rates at their current levels - 3.4 percent - before they double, by law, on July 1.

The rate change would affect an estimated 7.4 million students, who would each see an additional $1,000 in debt per year at the higher rates, according to the White House.

"We should be doing everything we can to put higher education within reach for every American - because at a time when the unemployment rate for Americans with at least a college degree is about half the national average, it's never been more important," Obama says. "But here's the thing: it's also never been more expensive."

Obama says that on average Americans now have more student loan debt than credit card debt - a prospect which he says is dissuading some lower-income families from considering higher education.

"In America, higher education cannot be a luxury," Obama says. "It's an economic imperative that every family must be able to afford."

The president will visit college campuses in North Carolina, Colorado and Iowa next week to leverage popular support for his plan and to pressure Congress to extend rates at current levels.

He says failure to do so would be a "tremendous blow" and something that's "completely preventable."

Some Republicans oppose extending the lower student loan rates in part because of the high cost to taxpayers, which the Congressional Budget Office estimates at $6 billion each additional year.

"Bad policy based on lofty campaign promises has put us in an untenable situation," said Rep. John Kline, R-Minn., who chairs the House Committee on Education and Workforce.

"We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers," he said. "My colleagues and I are exploring options in hopes of finding a responsible solution that serves borrowers and taxpayers equally well."

Education Secretary Arne Duncan said Friday that the administration was eager to work closely with Congressional Republicans to find a compromise.

"I think we need to get the immediate issue dealt with now, but let's all work together as a country to work on the long-term issue as well," Duncan said. "We need to pay for it. We're committed to paying for it."

Still, Obama claims in his address that some Republicans' position on student loan rates reflects broader opposition to government funding for programs and initiatives to help the middle class.

"We cannot just cut our way to prosperity," Obama says of House Republicans' budget proposals. "Making it harder for our young people to afford higher education and earn their degrees is nothing more than cutting our own future off at the knees."

"Congress needs to keep interest rates on student loans from doubling, and they need to do it now," he says.