Obama, courting youth vote, sets student-loan push

WASHINGTON (Reuters) - President Barack Obama will use a tour of election battleground states next week to push Congress to prevent interest rates on federal student loans from doubling, a move that could appeal to middle-class and younger voters crucial to his re-election chances.

Obama will make his pitch in speeches at universities in North Carolina, Colorado and Iowa, three states expected to play a major role in the November election. The youth vote is a key national constituency his campaign team hopes to re-energize.

The two-day trip is part of a campaign by the Obama administration to get Congress to extend low interest rates on college loans to more than 7.4 million students.

If lawmakers fail to act, rates on the loans will double on July 1 to 6.8 percent -- this at a time when other loans boast near record low rates, with the average for a 30-year mortgage at 3.9 percent this week.

The new push jibes with the White House's strategy of casting the Democratic president as a champion of the middle class, to draw contrasts with congressional Republicans and Mitt Romney, his wealthy Republican presidential challenger.

"We have an immediate crisis," Education Secretary Arne Duncan told a White House briefing. "College has to be affordable for the middle class."

Republicans insist that Democrats created the problem in the first place when they controlled Congress and passed a bill that cut rates on subsidized Stafford loans in 2007 but allowed them to revert back to higher levels after four years.

Despite a bitterly partisan climate in Washington that has mostly stalled Obama's legislative agenda, a spokesman for House of Representatives Speaker John Boehner, the top Republican in Congress, held out the prospect of bipartisan cooperation.

But at the same time, Republicans also want to spotlight what they see as a lack of fiscal responsibility by Obama and his fellow Democrats. The non-partisan Congressional Budget Office says extending the 3.4 percent interest rate on subsidized Stafford loans would cost about $6 billion a year.

"I have serious concerns about any proposal that simply kicks the can down the road," said John Kline, the Republican chairman of the House Education and the Workforce Committee. "My colleagues and I are exploring options in hopes of finding a responsible solution."

ELECTION-YEAR POSTURING?

Democrats put the onus on Republicans, who control the House of Representatives, for failing to act. "Despite calls to work together to prevent this from happening, House Republicans have so far taken no action," Democratic committee members said.

Mark Kantrowitz, a college financial-aid expert, sees the issue as mostly election-year posturing by Obama's Democrats. "It's timed perfectly to come up this year," he said.

Duncan denied the Obama administration was using student loans - at a time of growing public concern about college costs - as an election "wedge" issue and said it merited bipartisan support. "I could care less about politics and ideology," Duncan said.

Obama may be seeking to rekindle some of the enthusiasm of younger voters who turned out in record numbers in the 2008 election and helped sweep him into the White House.

Polls show stubbornly high unemployment has chipped away at his support among young people, though he retains a strong advantage with this voting bloc against the Republicans.

Obama will reach out to a broader youth audience when, in North Carolina on Tuesday, he tapes an appearance on NBC's "Late Night with Jimmy Fallon." the White House also plans a social media campaign through Facebook, Twitter and Google+.

Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said letting the rate rise to 6.8 percent would be a "national embarrassment." Students on average would face an additional $1,000 in debt per year, the White House said.

He said it could also be a boon to private lenders, who were hit hard in the student loan scandal years ago and took a more recent hit amid the U.S. recession.

Nassirian said it would give them the opportunity to jump in with lower-rate products that look good to borrowers now but that could rise to double-digit rates down the road.

(Additional reporting by Susan Heavey and Thomas Ferraro; Editing by David Brunnstrom and Christopher Wilson)

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