Partisanship, inaction cause student loan rate hikes
Let’s say me and you were to go to college right now. Yes, right now, this very instant. We’d enroll in courses that we probably won’t remember very much about in the long run (unless they’re pertinent to our occupations or were extremely memorable), and would have to pay for it heftily. A scholarship and some student loans would take some of the slack off our pocketbooks, temporarily. And our pocketbooks need some slack taken off of, because at this college let’s say tuition is $6,000 a year (and climbing), we need a $1,000 for books and other materials needed for coursework, $3,000 for room and board (which may or may not include a meal plan), and let’s say another $500 have been tacked on for mandatory fees. Do the math and that’s 10.5K a year, and, for the purpose of this scenario, we only got $2000-$4000 in scholarships, since we didn’t get a full ride scholarship for being totally awesome (Har har. Though on a serious note, you are. Take that as a compliment.) If you or I were to get a bachelor’s degree from said institution, which is anywhere from 4-5 years depending on how many hours one takes a semester, that’s anywhere from $42,000 to $52,500.
Now let’s fast forward to a few months after graduation day, assuming either of us didn’t flunk out or drop out. While $26,000 of student loan debt may not seem like much to others (there are some who are in worse debt), it may seem like a lot to you. After all, you didn’t buy a house, nor did you buy a car, you went to school.
While you’re chewing on that, you should also know that the rates on those Stafford loans you borrowed for the purpose of the above scenario have recently doubled. And it’s totally Congress’s fault.
On July 1 of this year, the interest rates on Stafford loans taken out after that date have jumped to 6.8% And since 2010, with the passage of the Affordable Care Act (a/k/a “Obamacare”) the money paid for these government-subsidized loans goes back to the government, rather than a bank. What does that mean? New college students will be $2,600 further in debt, according to Congress’ Joint Economic Committee. (That is, unless it were to be reversed.)
Why was the interest rate doubled? Well it was cut down to 3.4% in 2006, but at some point the government realized that that rate cut was costing them $6 billion. Both parties in Congress couldn’t come to an agreement before the 4th of July holiday. Why? Republicans, and even President Barack Obama, to a point, want to see the interest rates tied to market rates. People against this idea say that going this route isn’t focused on supporting students going to college and getting degrees, it’s focused strictly on providing the government with more revenue. Democrats have been calling for a one year extension of the 3.4% rate while trying to fix the issues in the long term. (The Keep Student Loans Affordable Act of 2013.)
There’s a bipartisan bill out there called the “Bipartisan Student Loan Certainty Act”, sponsored by Sens. John Hoeven, Joe Manchin (D- W. Va.), Lamar Alexander (R- Tenn.), Kelly Ayotte (R- N.H), Richard Burr (R- N.C.), Tom Carper (D- Del.), Tom Coburn (R- Okla.), Johnny Isakson (R- Ga.) and Independent Senator Angus King, of Maine. (So it’s really multi-partisan, if you think about it). This bill would tie all federal student loan rates to the 10-yr. U.S. Treasury note rate, essentially tying it to market and job conditions. It would also add 1.85% for subsidized and unsubsidized Stafford loans, 3.4% for graduate Stafford loans, 4.4% for PLUS loans, and would lock those rates in forever. Democrats who aren’t sponsors of the bill have been trying to snuff it out, calling it a “bait-and-switch”, a “Republican” solution, and a, to quote a Politico article by Jose DelReal, “shortsighted solution that would do more damage than good in the long run”.
Another proposal out there that’s similar is the Smarter Solutions for Students Act, which only passed in the House of Representatives. Like the above, it would tie student loan rates to the 10-yr. Treasury note rate, add 2.5%, and have a cap of 8.5%, according to Wall Street Cheat Sheat.com.
Make no mistake, our government does need revenue, after all our national debt is in the trillions. You know what else is in the trillions too? The amount of student loan debt people in this country are in at this very moment.
It is a damn shame when Congress fails to act, or allows politics to get in the way of making decisions that are beneficial to the proletariate, the middle class, the lower class, the upper class, everyone. Adam Jentlesen, a spokesman for Senate Majority Leader Harry Reid, said to Fox News “There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations.” Yeah well, it can take two to make a thing go wrong. Student loan rates were just the latest thing affected by partisan politics and Congressional inaction. But regardless of whatever situation may take place, if Congress fails to act, it’s the constituents who pay.
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