Another hit to students
Indecision in Congress results in heavy burden on college attendees
Unless Congress acts quickly, the 7 million college students who qualify for federally subsidized Stafford loans are going to face a sudden doubling of their interest rate, from 3.4 percent to 6.8 percent, effective Monday, July 1.
At a time when higher education is becoming increasingly unaffordable, this rate increase will keep many students from entering or continuing in college, and will leave those who graduate with greater debt.
Congressional Republicans and Democrats both said they wanted to avoid the automatic rate hike, but they couldn’t agree on how to do so. Republicans want to tie the rate to financial-market rates, while the Democrats want Congress to continue setting the rate, but at a lower figure.
The best option at this point is for Congress, when it returns from its July 4 recess, to pass a one-year extension of the current rate.
Neither the Republican nor the Democratic proposal has garnered much support outside the Capitol. In fact, the plan that has generated the most enthusiasm is Massachusetts Sen. Elizabeth Warren’s Bank on Students Loan Fairness Act, introduced in May. It would charge students the same interest rate that banks pay the U.S. Treasury for the money they borrow: 0.75 percent.
Warren points out that the government takes in $51 billion annually in profit from student loans. Why, she asks, are we making money off poor and middle-class college students at a time when big banks can borrow money at such low rates?
A recent poll shows that 83 percent of respondents want to keep student-loan rates from increasing, and almost two-thirds support lowering them to 0.75 percent.
For her part, Warren supports passage of a one-year extension of the current rate. The rest of us can hope that during that time Congress will see the wisdom of using federal funds to help—not hinder—students.