Student loans: Do Republicans really think program is socialist?

President Obama said Friday that Republicans in Congress are calling federal student loans socialism. Republicans reject the charge. But the issue is highlighting political differences. 

By , Staff writer

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    President Obama speaks at Washington-Lee high school in Arlington, Va., Friday.
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President Obama repeated his drumbeat for student-loan relief on Friday, telling an audience of Virginia high school students that Congress must act soon to prevent a doubling of federal-loan interest rates.

With the cost of subsidized Stafford loans set to double for borrowing that occurs after July 1, the issue has become a major theme for the president in the past couple of weeks.

Republican lawmakers show an openness to preventing the interest rate from jumping to 6.8 percent. But they and Mr. Obama are also using the issue as an election-year opportunity to underscore their political differences.

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In no small measure, this year's campaigns for control of the White House and Congress could boil down to a fight over government's proper role in the economy. Obama wants to paint the Republicans as outside the mainstream in their antipathy toward government programs, while Republicans are labeling him as an extremist in his advocacy of big government.

Obama used his address at Washington-Lee High School in Arlington, Va., to return to the fray.

One GOP congressman, he said, likened the government's student-loan activity to socialism. Is it socialism, Obama implied, to build a better-skilled work force?

"America is not just about protecting a few people who are doing well. America is about giving everybody a chance to do well," Obama said, giving his own take on rugged individualism and drawing applause. "Everybody here, you're only here, you're only succeeding because somebody, somewhere, felt a responsibility not just to themselves, not even just to their own families, but to the country as a whole."

Some Republicans, however, say Obama's focus on government-subsidized loans for students represents a weak effort to cover himself for the poor performance of the economy on his watch.

On Friday, the Labor Department reported that the US created just 115,000 jobs in April, a cooler pace than earlier in the year. The unemployment rate edged down, but mainly because many working-age Americans have dropped out of the labor force. And the jobless rate, at 8.1 percent nationwide, is even higher for young Americans like the ones Obama addressed in Virginia.

The socialism charge, in the context of student loans, arose recently from Rep. Todd Akin (R) of Missouri, who is now running for the US Senate. He criticized a government move to "take it all over" and said, "The government needs to get its nose out of the education business."

Democrats say the private student-loan business is alive and well, and that Obama merely removed a costly role for banks as middlemen in some federal loans.

Stafford loans, as the largest student-loan program, represent a major source of funding for US college students, alongside savings and work income (theirs and their parents'), and grants or scholarships. Many borrowers are already paying a 6.8 percent rate. But without action by Congress, those who qualify for subsidized Stafford loans would see their rate double to that level on July 1.

Obama said the change would be like "a $1,000 tax hike for more than 7 million students across America."

The back-and-forth between Republicans and Obama has built from there. 

Andrew Biggs, a scholar at the conservative American Enterprise Institute, argued in Friday's Wall Street Journal that the weak job market imposes an even steeper financial burden on college students.

"Roughly two-thirds of lifetime wage growth occurs in the first decade of employment, when individuals build their skills and match them to the right jobs.... If we assume that unemployment today is one percentage point higher than it could have been given more effective policies [than Obama's] today's new college graduates on average will lose around $40,000 in inflation-adjusted income over the next 15 years," Mr. Biggs wrote.

That money, he said, could repay the average $25,000 loan balance of student borrowers.

Some economists say it's doubtful that Republican economic alternatives could have brought unemployment down by an additional percentage point.
 
Obama, meanwhile, has tried to attack Republicans with their own words – though by leaving some important ones out. When talking to students at the University of North Carolina recently, Obama described one member of Congress as saying she has “very little tolerance for people who tell me they graduate with debt … because there’s no reason for that.”

Rep. Virginia Foxx (R) of North Carolina actually said, "I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that" – a statement appears to be more a caution against imprudent borrowing than borrowing at all. Representative Akin said he also felt "misquoted" by Obama, and added that it would be "more reasonable" to preserve the low interest rate than to let it double, according to a report in the St. Louis Post-Dispatch

Obama said Friday that he expects the Senate will vote next week on a bill to prevent the interest-rate hike. He sought to pressure House Republicans, commenting that they "are saying they’re only going to prevent these rates from doubling if they can cut things like preventive health care for women instead."

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