GOP broke the student loan program

The student loan debt fight no one saw coming

Democrats say the GOP broke the student loan program. They don’t want to give Republicans a win by helping them fix it.  

By Bianca Quilantan

A long-shot bid in the House to rein in the rising cost of student debt is facing resistance from an unlikely corner: Democrats.

Two House Republicans with a history of challenging their leadership are trying to gather enough support to force a vote on legislation that would cap interest rates on federal student loans.

Bill sponsor Rep. Anna Paulina Luna (R-Fla.) has said that she is focused on making sure Americans “don’t have to spend their whole lives trying to pay off their debts.” But she’s only convinced one of the many Democrats she’ll need to pull this off — fellow Floridian Rep. Jared Moskowitz — that she’s sincere.

Other Democrats, who have spent a decade pushing student debt relief as a tenet of the party, say they aren’t interested in helping Republicans fix an affordability problem they made worse with their domestic policy law last year. That measure formally wiped out a Biden-era program that allowed some borrowers to pay as little as $0 per month, and Democrats say it hiked expenses on people already struggling to pay their bills.

They also see little value in supporting Luna’s legislation when they have their own.

“I think they should come and support our bill because ours is actually fiscally more responsible, which would normally be a Republican priority,” Rep. Joe Courtney (D-Conn.) said of the legislation Luna is pushing with Moskowitz and Rep. Mike Lawler, an embattled New York Republican. Courtney has a competing measure with Sen. Peter Welch (D-Vt.) that he reintroduced the week before August recess.

The bill Luna is trying to advance with a discharge petition, a maneuver that can trigger a floor vote if 218 lawmakers sign on, would cap interest rates on all federal student loans at 2 percent. While that’s far below the current rates, which range from roughly 6.5 percent to 9 percent, the American Enterprise Institute, a right-leaning think tank, estimates the proposal could cost at least $30 billion annually.

Courtney’s bill would instead refinance the interest on all new and existing federal student loans to 0 percent and offset the cost of eliminating interest by establishing a trust fund.

The fight is unfolding as Democrats try to preserve their advantage on affordability heading into the midterms. They argue President Donald Trump’s student loan changes and his administration’s push to restart debt collection have intensified the financial pressure on borrowers already dealing with high costs for housing, groceries and other essentials.

“So many people — because they absolutely can’t afford this amount of debt — are getting their credit records smashed, which is a further impediment to getting ahead,” Welch said. “This is ground zero of the affordability crisis for a whole generation of Americans.”

Although no legislation advanced with a discharge petition has become law this Congress, Luna co-sponsored one of the few that got the necessary signatures last year. The proposal from Luna, Lawler and Moskowitz appears to be the most viable way for Congress to deliver some relief to borrowers given the bipartisan group behind it.

Luna has argued Democrats are refusing to sign up because the petition is attached to a 2 percent cap plan introduced by Lawler, and said she wants to switch to a bill led by Moskowitz to test whether “they’ll stop playing politics.”

A Moskowitz-led bill would remain the same and his office said in a statement the congressmember is working with Luna’s office on the discharge petition. “This is a process that takes time,” they said.

There are also plenty of obstacles from the right.

Trump and congressional Republicans have railed against what they deem are the out-of-control costs of higher education and have framed the GOP law as an effort to tackle those costs even as the law itself ignited fresh concerns over college affordability.

The Trump administration has also touted its efforts to make higher education more affordable, including the new Repayment Assistance Plan, which launched in early July and prevents runaway interest accumulation by waiving unpaid interest. Reducing student loan interest across the board could also build on a move by the Trump administration in June to lower the interest by 1 percent for borrowers enrolled in auto pay.

Preston Cooper, a fellow at the American Enterprise Institute, said capping student loan interest may appeal to some moderate Republicans because it is not outright loan forgiveness. But he argued the benefit would still be expensive and could disproportionately help borrowers with large balances from graduate and professional programs, including doctors and lawyers who are likely to earn enough to repay their debt.

“If we’ve decided that we have a magic money tree and we can just throw money around, I would say that closing the Pell Grant shortfall really ought to be a much higher priority for Congress than this,” Cooper said.

The lack of budget balancing has made Democrats like Courtney suspicious.

“I’ve been through the rodeos here,” he said, pointing to other bills that have addressed student loan debt, including one signed into law by then-President George W. Bush to increase Pell Grant funding and create the public service loan forgiveness program, and one signed by then-President Barack Obama, which mandated fixed rates on federal student loans.

“Both of those bills actually had pay-fors and offsets,” Courtney said.

While the Luna bill is too small for many Democrats and too expensive for some conservatives, progressive advocates who want broader debt relief are willing to wait for the election results.

The House trio’s efforts were initially met with praise from Protect Borrowers, a group that advocates for student loan forgiveness, and other left-leaning groups. Now that support has waned.

“The big beautiful bill jacked up student loan costs for families by thousands of dollars a year, and it’s going to take a real swing for the fences to be able to get things back to a place where people can actually make ends meet,” said Mike Pierce, director of Protect Borrowers.

Pierce said if the balance of power in Congress changes in November, progressive groups will be ready to push a Democratic majority toward a sweeping affordability agenda.

“But today, right now, student loan borrowers are getting creamed,” he said. “This is Republicans’ fault, and voters need to know it.”

Still, it’s also not clear that Democrats have settled on a single alternative.

Since interest is used to pay the operating costs of the federal student loan program, Welch and Courtney’s legislation would direct the Education Department to create a trust fund to offset the cost. Borrowers would make payments on their principal balance, which would be deposited into the fund and invested.

But before leaving Washington for the month, House Education and Workforce ranking member Bobby Scott (D-Va.) also pushed his own dueling proposal to address interest rates.

Scott’s proposal, which he reintroduced last August, would tie interest rates for all new federal student loans to the 10-year Treasury note and ensure no new loan will have an interest rate higher than 5 percent. He made sure to bring it up at a late July roundtable he held about the student loan changes with education advocates.

“Student loan debt now exceeds $1.7 trillion. Borrowers need clear guidance and certainty,” Scott said the same day Courtney and Welch held a press conference about their measure. “Instead, they’re forced to deal with uncertainty and chaos created by an administration that has systematically weakened the federal student aid system.”

In the Senate, the Democratic response to the bipartisan proposal is also lagging. Sens. Andy Kim (D-N.J.), a member of Senate HELP, and Elizabeth Warren (D-Mass.) said the effort was a good start, but wanted to see more details before deciding whether they should throw their support behind it.

“Anything that cuts the cost of student loans is sure headed in the right direction,” Warren said.

Texas-based GOP consultant Brendan Steinhauser said some Republicans are starting to pay attention to student loans because they recognize all of the affordability issues are exasperating voters. He said the GOP is looking for ways to say “we feel your pain.”

“Everyone can see when gas prices are up, when groceries cost a lot of money, when eating out costs a lot of money, and of course when housing costs a lot of money,” he said. “It hits people in the pocketbook. … [Student loans are] also playing a big role because students are graduating. The job market is not great.”

There could also be movement before the new Congress is seated, Steinhauser said.

“Once the political piece of this has played out … you could see them saying ‘OK, let’s actually work together to fix this and find a bipartisan solution,’” he said. “Oftentimes that’s where people look to get things like that done.”