WASHINGTON - President Obama's campaign to prevent the cost of college from soaring for millions of students faces fierce opposition from a Minnesota congressman who says the country simply cannot afford to keep student loan interest low.
More than 7 million students who need to take out new federal loans this year -- including 207,000 in Minnesota -- face a sharp increase in interest rates under the popular federally subsidized Stafford Loan program.
Without congressional action, the loan rate will rise to 6.8 percent from 3.4 percent on July 1.
U.S. Rep. John Kline, who heads the House Committee on Education and the Workforce and is the House's point man on education issues, is among the Republicans in Congress reluctant to extend the current rates, a move that would cost about $6 billion per year in additional subsidies, according to a report from the Congressional Budget Office.
"We must now choose between allowing interest rates to rise or piling billions of dollars on the back of taxpayers," Kline said in a statement.
St. Cloud State University student Amanda Bardonner is among the Minnesota college students who could see the interest rates double this summer -- an increase that would cost students an average of $1,000 per year, the White House estimates.
Bardonner doesn't qualify for low-income federal loans and grants and is considering private loans to pay for her final semester in the fall.
As chairwoman of the Minnesota State University Student Association, she also is lobbying lawmakers and rallying student support in an effort to keep the interest rate low.
Bardonner, an international business and marketing major, also works as a customer service representative at Shopko in St. Cloud. "This isn't a partisan issue," she said. "You have to really invest in education. You're touching every student."
According to an annual report by the Project on Student Debt, Minnesota college students who graduated in 2010 had an average loan debt of $29,000. Nationally, student loan debt now eclipses credit card debt, with some putting the figure at $1 trillion. Some economists say the debt may be the next bubble to burst, threatening the financial future not only of students, but the credit ratings and the security of retirement funds security for parents who co-signed for loans or mortgaged their homes to send children to college.
Speaking to students in North Carolina on Tuesday, Obama told them he had been in their situation. "Check this out, all right? I'm the president of the United States. We only finished paying off our student loans about eight years ago. That wasn't that long ago," he said, as students erupted in laughter. On a more serious note, he said: "At this make-or-break moment for the middle class, we've got to make sure that you're not saddled with debt before you even get started in life."
College, he said, isn't just one of the best investments "you can make in your future, it's one of the best investments America can make in our future."
U.S. Rep. Betty McCollum will host a forum on Monday at Century College in White Bear Lake to discuss a proposal to keep the loan rate intact.
Democratic U.S. Sens. Amy Klobuchar and Al Franken and Rep. Keith Ellison have co-sponsored legislation in the Senate and House to prevent the rate increase.
"Higher education provides students with the skills needed to be competitive ... and creates a gateway to well-paying careers," Klobuchar said in a statement. " ... burdening students with thousands of dollars in additional debt is simply unacceptable."
Kline also criticized Democratic-backed legislation in 2010 that revamped loan programs for college students, shifting the responsibility for making low-rate student loans to the government. The new law ended federal subsidies that once went to private banks.
At the time, Kline said the new law replaced a "popular student loan model with yet another one-size-fits-all government bureaucracy."
A campaign issue once again
While campaigning in 2006, congressional Democrats pledged to cut the student loan rate interest by half. Once they gained power, they -- along with some Republicans -- passed the College Cost Reduction and Access Act, which President George W. Bush signed.
"Bad policy based on lofty campaign promises has put us in an untenable situation," Kline said in a statement.
With the law set to expire this summer, student loans have once again become a campaign issue as Obama looks to woo younger voters. His appearance on Tuesday at Chapel Hill, N.C., is part of a sweep of college campuses in the South, West and Midwest.
Mitt Romney, the presumptive Republican presidential nominee and who also is looking to raise his standing with young voters, agrees that Congress should keep the low rates in place.
But Kline said that "I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run -- which is what put us in this situation in the first place."
Senate Minority Leader Mitch McConnell, R-Ky., said the question is not whether rates should go up but how to deal with the additional costs.
"I don't think anybody thinks this interest rate ought to be allowed to rise," McConnell told reporters. "The question is: How do you pay for it? How long do you do the extension?"
The Associated Press contributed to this report. Corey Mitchell is a correspondent in the Star Tribune Washington Bureau. Twitter: @StribMitchell