Yesterday, Democrats in the House of Representatives made good on their promise to pass a 50% cut in student loan interest rates. As we predicted, the plan passed the House easily. But the margin still was eye-popping --356 to 71.
Part of what helped the Democrats attract so many Republicans to their plan was the limited and phased-in nature of the cut. Democrats limited their interest rate cut to subsidized Stafford loans for undergraduates only. They also moved to phase-in the cut over five years. The current interest rate of 6.8 percent drops to 6.12 percent this year, 5.44 percent in 2008; 4.76 percent in 2009; 4.08 percent in 2010; and 3.4 percent in 2011. As a result, the total package required less than $6 billion offsets over five years -- a manageable sum given the very large inefficiencies that exist in the federal student loan program.
The next step toward putting the Democrats' student loan interest rate cut into effect will occur in the United States Senate. While Senate Democrats have been supportive of the rate cut, it looks like they're after more than just the narrow measure advocted by their friends in the House. How this disagreement plays out will be worth watching in the long run.
The big number the D's put up on the vote tally board belies the nature of the debate, but the bottom line is that this is a big early victory for the new House leadership. Here are three reasons the Dems scored so big on Wednesday:
<li>First, the Democrats want to deliver, so they scaled back their proposal to make it more palatable to budget hawks and moderates.<br /> </li> <li>Second, many of the lender cuts put into effect have been <a href="http://higheredwatch.newamerica.net/blogs/2007/01/congressional_dems_embrace_students_not_banks_strategy" target="_blank">proposed previously</a> by President Bush or House Republicans, so there wasn't a lot of cover to be had.<br /> </li> <li>Third, Republicans on <a href="http://www.loc.gov/exhibits/us.capitol/s3.html" target="_blank">Jenkins' Hill</a> are scared. In November they saw their home districts' 2006 vote percentage drop like a rock and are now seeing an <a href="http://www.slate.com/id/2157732/nav/tap1/" target="_blank">unpopular President</a> take their party deeper into an unpopular war. </li>
A conservative Congressional education staffer told Higher Ed Watch this week that "on domestic issues, the President is no longer relevant to rank and file" Republicans on the Hill. That reminds us a lot of what folks (wrongly) said about President Clinton in 1995. The difference is that President Bush is in his last term. But that still doesn't mean he's done.
Watch for President Bush to reach out, publicly and privately, to Capitol Hill Democratic Education leadership to assert his relevance anew. Behind Curtain #1 is the State of the Union. Behind Curtain #2 is the FY 2008 budget. And behind Curtain #3 is...Nelnet.
You know who really lost big yesterday? These guys.