During his first stop on a three campus tour that will take him to universities in key election states, President Barack Obama championed low interest rates on federally subsidized student loans and pledged to put "a good education within the reach of all who are willing to work for it."
Obama spoke Tuesday afternoon to a crowd of about 8,000 packed into the University of North Carolina at Chapel Hill's Carmichael Arena and later that evening at the University of Colorado. He will address students at the University of Iowa today. The president warned of a looming economic crisis as student loan debt continues to mount. He told students to contact their congressional representatives to thwart a scheduled doubling of a student loan interest rate.
"Americans now owe more on their student loans than they do on their credit cards," he told the crowd. "So that means you've got to make pretty tough choices when you are first starting out."
According to the U.S. Department of Education, student aid loans totaled $848 billion as of September 2011. That includes 146 million loans to 36 million unique borrowers. Federal student loans are awarded per semester, so a student and his parents can acquire multiple loans during the course of a student's college tenure. Obama said students owe, on average, $25,000 when they graduate.
The president told the standing-room only crowd at UNC that the debt load has implications beyond a student's bank account.
"When a big chunk of every paycheck goes towards loan debt, that's not just tough on you, that's not just tough for middle-class families, it's not just tough on your parents-it's painful for the economy," he said. Obama insisted college should be more affordable, the crux of his entire message. "Every American family should be able to afford it," he said to applause.
Obama also quipped that he and his wife, Michelle, know something of student loan debt, having only paid off theirs about eight years ago.
UNC Young Democrats Vice President Lauren Hovis, a junior political science major who attended the speech, said Obama's support for students and his desire for every American to be able to go to school encouraged her: "I appreciated his personal anecdote about his own struggle with student loans and how he is going to strive to help curb them."
Matt Oakes, membership chairman of the UNC College Republicans, said the president's visit was politically savvy because North Carolina is considered a swing state in the 2012 presidential election.
"It was an impressive event, and the president certainly assured students that he was fighting on their behalf to keep tuition costs affordable," Oakes said.
Part of that fight, Obama said, is thwarting a looming interest rate hike for student loans. Obama repeatedly stated, in North Carolina and again in Colorado, that interest rates on students loans would double.
To the UNC students he said: "Five years ago, Congress cut the rate on federal student loans in half. But on July 1â€¦that rate cut expires. And if Congress does nothing, the interest rates on those loans will double overnight."
But only one specific type of student loan interest rate will be affected by the change, not all of them. There are two forms of federal Stafford Direct Loans, and only one is subsidized. The Direct Unsubsidized Loan is awarded without the borrower having to show financial need. The interest on that loan-6.8 percent-starts accruing as soon as the loan is paid to the borrower or the respective school.
The Direct Subsidized Loan is at the heart of the legislative fight. Interest on these loans does not accrue until six months after the student leaves school. Legislation passed in 2007 by the Democratically controlled Congress incrementally reduced the Direct Subsidized Loan interest rate by half. But that decrease is due to expire July 1, and the rate will double from 3.4 percent to 6.8 percent, unless Congress passes legislation to keep the rate low.
Obama derided Republicans for not yet committing to maintain the current rate.
"They certainly wouldn't let your student loan rates double overnight," he told the audience. "So when you ask them, 'Well, why aren't you making this commitment?' They said, 'Well, we got to bring down the deficit.' Of course, this is the deficit they helped run up over the past decade."
The crowd booed when the president further chided the Republicans by recounting comments made by Rep. Virginia Foxx, R-N.C. But his recitation of her comments left out some important context. Obama quoted Foxx as saying she had "very little tolerance for people who tell me they graduate with debt because there's no reason for that."
The crowd booed.
He continued, "I'm just quoting here. I'm just quoting. She said, 'Students who rack up student loan debt are just sitting on their butts, having opportunity dumped in their laps.'"
But the congresswoman, who took seven years to put herself through UNC Chapel Hill without any financial aid, actually said she had "little tolerance" for people who graduated with "$200,000 in debt or even $80,000 in debt because there's no reason for that."
She made her comments during an interview on the G. Gordon Liddy Radio Show. Foxx continued, "We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says, 'life, liberty and the pursuit of happiness.' You don't sit on your butt and have it dumped in your lap."
Foxx chairs the House Subcommittee on Higher Education and has taught or served as a consultant and administrator for North Carolina community colleges and Appalachian State University. She did not return calls or emails requesting a response to the president's remarks.
Hovis said the president was justified in his criticism of the Republicans and their lack of commitment on the student loan rate issue.
"I think Congress should try to keep [the 3.4 percent rate] and possibly even decrease the interest rate, because if more students can get through college and get good jobs then that will help improve the current financial crisis we are trying to get out of," she said.
Oakes, a political science and Hispanic studies major, agreed that higher education is an important topic of discussion, but the president's focus should be on the health of small businesses and the jobs they provide, he said: "This is what college students really need-jobs. They do not just want lower interest rates on their loans. The larger issue today is that graduating college students cannot find jobs."
Republican presidential candidate Mitt Romney this week added his support for the extension of the lower interest rate.
In 2008, candidate Barack Obama harnessed the support of a historically large number of young adult voters. On Tuesday, he did not miss the opportunity to rally that base, describing how he championed their cause while in office.
Obama touted the government's acquisition of the student loan program. Once administered through banks, the Department of Education now issues all student aid loans, "bypassing the middleman," and saving $60 billion that can be reinvested in student aid, he said.
Student loan payment installments have been capped at 10 percent of the borrower's income for those who make timely payments. The administration established the Consumer Financial Protection Bureau which produces a factsheet on student loans and financial aid. He told the students to call on Congress to continue the tuition tax credits, increase the number of Pell Grants and double the number of work-study jobs over the next five years.
The president also warned universities to curb "skyrocketing" tuition rates or face reduced federal funding. And states, he added, should make higher education a priority in their budgets.