Congress fails on student loan rate debacle

On July 1, Congress allowed the interest rates on student loans to rise from 3.4 percent to 6.8 percent, making it even more costly for students to go to college and prepare themselves for the future.
Jul 18, 2013

It’s a sad state of affairs when educating the future leaders of our country is turned into a political football, for which Congress should receive a failing grade.

It’s critical that members from both sides of the aisle come together, reverse the rate hike and develop a long-term solution to keep this from happening again. Having not done so before they went on recess is inexcusable. 

The irresponsible actions of lawmakers left about 300,000 Michigan college students saddled with even more debt. According to the Project on Student Debt, nearly two-thirds of Michigan college students graduate with debt that averages nearly $27,500. The higher interest rate will add approximately $1,000 to that debt. 

Legislators should be working hard to find ways to make it more affordable for people to attend college, not ways to make it even more challenging. Our inability to do so will put us even further behind when competing at the global level.

Like most things that the government is a part of, the resolution will likely be slow in coming, and undoubtedly tied to other unrelated issues. One plan suggests that student loan rates be tied to the 10-year Treasury note, which would eliminate the need for Congress to set the rate. 

This plan, however, doesn’t protect students from market fluctuations when rates swing upward. Even though interest rate caps are proposed, this still doesn't provide the safeguards needed for students who will likely be drowning in debt upon completion of college.

Find a workable solution that benefits all students, giving everyone an opportunity to achieve a college education should they have the talent and ability to do so.

Our Views reflects the majority opinion of the members of the Grand Haven Tribune editorial board: Kevin Hook, Cheryl Welch, Matt DeYoung, Alex Doty and Fred VandenBrand. What do you think? E-mail us a letter to the editor to news@grandhaventribune.com or log-in to our website and leave a comment below.

Comments

Mystic Michael

The problem to which this editorial refers is merely the tip of a very large iceberg. Even if/when Congress cuts the current 6.8% interest rate on Stafford loans back to its previous 3.4%, it's still equivalent to bailing out the Titanic with a tea cup.

The federal student aid program - loans, scholarships & grants - as originally envisioned, was revenue neutral. Its purpose was not to turn a profit. It was to build a better-educated nation, the public policy rationale being that well-educated citizens are typically much healthier, more prosperous, and more self-reliant than those who are not. They tend to require less in terms of public services - and they contribute much more in taxes; thereby generating public revenues that can be used for all manner of other public goods: a virtuous circle, so long as it is managed and supervised properly. The program worked great.

The current problem is that, sometime during the past one-third century or so, the system became corrupted - in the same way that corruption typically occurs: with powerful, wealthy private interests subverting the public interest by flooding the system with money. They buy up Representatives & Senators. Those members of Congress then starve & demoralize the appropriate regulatory agencies, while promoting anti-competitive legislation that unfairly favors their "clients".

How do you think we got the Great Wall Street Crash of 2008 that nearly killed the world economy, while not a single Wall Street executive has been sent to prison? The banking industry gutted the SEC, while getting the Glass-Steagall Act repealed.

How is it that the natural gas industry doesn't have to reveal the carcinogenic chemicals they pump into the ground (and the subterranean aquifers) while "fracking"? Because their lobbyists got an exemption from the Clean Water Act. And so on...

Same thing with the student loan "industry". Thanks to their aggressive lobbying, Sallie Mae - the Student Loan Marketing Association - has been making windfall profits now for years. Even the federal government itself now treats student loans as a cash cow. That was never supposed to happen. And it's a disgrace.

We must insist that the system be cleaned up - so that it once again fully serves its intended purpose: to create a highly-educated nation - not to make wealthy, powerful interests even more wealthy & powerful, at the public's expense.

sun and shine

Student and parents need to take some responsibility with borrowing and then the interest rate will not affect as many individuals. I know we are steering our daughter to community college for the first two years which is very affordable for most if they are willing to work part time during the school year and full time during the summer. After those two years, we will have to see how she can achieve her goal with as little debt as possible at the end. And should she have to take on debt, she'll be encouraged to live at home for 1-2 years and pay the entire loan off as fast as possible so the interest rate will not be that much of a factor. I understand the scenario is not that easy for everyone but for most of the incoming freshman at major universities this fall, it could apply to a large percentage. I know as a parent first hand that my daughter is not half as excited about going to community college this fall as she would be if she was heading off to State but I am hoping that in 4-5 years, she'll be thanking us for our guidance. There are choices you can make so you don't have to borrow, or borrow much less and in return, the interest rate won't have such a drastic affect.

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