Says Rep. Paul Ryan’s budget proposal "would effectively double the interest paid out on existing and future student loans."
Loretta Weinberg on Monday, April 30th, 2012 in an op-ed published on NorthJersey.com
Loretta Weinberg said House GOP budget would effectively double student loan interest rates
A Democratic lawmaker wants Gov. Chris Christie to use his time on the national stage to voice the concerns of New Jersey taxpayers.
And the Republican governor should start by campaigning against a GOP budget proposal, Senate Majority Leader Loretta Weinberg said.
"The governor could begin by using his newfound national political prominence to urge his party to reject the budget proposal put forward by House Budget Committee Chairman Paul Ryan, R-Wisconsin, and recently approved in the House of Representatives along partisan lines," Weinberg (D-Bergen) wrote in an opinion column published April 30 on NorthJersey.com.
"The Ryan budget would be devastating for the state and the nation," she said. "It would curtail Pell grants for New Jersey scholars who would otherwise be unable to afford higher education, and it would effectively double the interest paid out on existing and future student loans."
With the debate over student loan interest rates still raging, PolitiFact New Jersey checked whether Weinberg’s portrayal of the potential increase was accurate. Mostly, it’s not.
Let’s first note that PolitiFact National recently examined a similar claim by President Barack Obama’s campaign that "Under the Romney/Ryan budget, interest rates on federal student loans would be allowed to double." PolitiFact National rated that False because the statement referred to Mitt Romney, who has said he opposes allowing the rate to double. In our case, we are looking at the more narrow claim about the Ryan budget.
The planned hike in rates stems from a law passed in 2007, when Democrats held the majority in Congress. That year, with bipartisan support, Congress passed the College Cost Reduction and Access Act, which gradually reduced interest rates for federally subsidized Stafford loans from 6.8 percent to 3.4 percent.
There are two types of Stafford loans: subsidized loans don’t accrue interest while a student is in school, but unsubsidized loans do.
The 2007 law only decreased interest rates for subsidized loans. But the law was temporary and if no legislative action is taken the rate returns to 6.8 percent on July 1.
That increase would only affect students taking out new loans. It would not impact existing loans, as Weinberg said.
Weinberg acknowledged her error, saying her point was "not well articulated."
"It does not affect existing loans, but it does affect existing students who may need new loans," she said.
So how does the House Republican budget proposal fit into this debate?
The Republican plan, which serves as a blueprint, does not address how to extend the lower rate. Obama’s budget request includes a one-year extension.
"The Ryan budget does not include any proposal to postpone the rate increase," said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation. But, he said, "the House Republicans did pass a bill to prevent the rate increase from happening and the Ryan budget isn’t legislation. It’s not a law."
The House passed a bill on April 27 that funds the rate extension with money for preventive health care programs from the new federal health care law. A spokesman for the House Budget Committee said that extension is "fully compatible with the House-passed budget." The White House threatened to veto the measure because of how it is funded.
Weinberg said the Republican bill "passed in a way that’s going to make sure that it’s not really going to pass."
Democratic proposals to pay for the extension include ending a payroll tax exemption for some business owners and ending tax subsidies for oil and gas companies.
Weinberg said that the House Republicans budget proposal "would effectively double the interest paid out on existing and future student loans."
The Republican budget plan does not stop a planned increase in interest rates for federally subsidized undergraduate loans.
But the potential hike, which would only affect new loans -- not existing loans, is the result of an expiration date built into a 2007 law.
Those are "critical facts that would give a different impression." We rate Weinberg’s statement Mostly False.
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