The Student Loan Timebomb
Colleges are one of a select number of institutions in America whose price is impervious to gravity. Across the country tuition is on the rise: Mississippi, Kentucky, Maryland, Florida, and so on. Unfortunately, this inflationary behavior is not happening concurrent with increased income. (For the time being, let's set aside the arguments regarding the worth of the college degree.) It is therefore unsettling to find that Congress appears willing to unduly burden a new generation of students.
As reported late last week, the White House has asked for an extension of the current interest rate on federal student loans. Congressional Republicans don't appear willing to agree to the relatively inexpensive measure -- a one-year freeze interest rates for subsidized Stafford loans -- which the CBO says would cost $6 billion. The stakes are high: As the Times puts it, "If Congress fails to act, the interest rate on the loans, which are taken out by nearly eight million students each year, will double on July 1, to 6.8 percent."
The arguments against preserving the rate are not convincing. Here, for example, is John Kline Jr., the Minnesota Republican chairman of the House Committee on Education and the Workforce:
Extending the low rate would be too costly, Mr. Kline said. “We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers,” he said. “I have serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run — which is what put us in this situation in the first place.”
It will likely not surprise you that the gentleman from the North, who was against extending jobless benefits for his constituents, doesn't mind kicking the can when said can is the Bush tax cuts. The charge that it's costly is also disingenuous...
[T]he cost of a one-year extension — $6 billion — is only marginally more than the annual amount that the Buffett Rule would have brought in, which Republicans argued was laughably trivial.
...and misdirected: Reports the AP, the cost (and increasing risk) is "a debt bubble with total U.S. student loan debt surpassing $1 trillion."
There's a bitter irony at play: The reason the interest rates are now so low (3.4%) is the 2007 College Cost Reduction and Access Act, which was supported by a slew of Republicans. This is no longer the case, of course: the legislation intended to extend the current rate has 127 co-sponsors, "all of them Democrats."