The Interest Rate Problem
by Daniel Luzer
President Barack Obama’s project to keep in interest rates on student loans at 3.4 percent, instead of allowing them to double as they’re planned to under the current law, appears to be turning into one of his primary higher education tactics as far as his reelection campaign is concerned.
Why is this important? Well that’s debatable but, according to a piece by Jennifer Mishory, Rory O’Sullivan, and Tobin Van Ostern publicshed byt the Center for American Progress:
Doubling interest rates will cost the average student and their families approximately $1,000 more for each year in school. This increase comes at a time when tuition has been rising at 8 percent per year on average. Students are actually paying more than the cost of tuition when loan interest payments are factored into the equation. Those borrowers relying on Stafford Loans will see a 20 percent increase in the effective cost of college next year.
Now, of course, the ultimate fairness of the policy is a matter of debate. Republicans in Congress argue that “we must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers.” Perhaps leaving the interest rates where they are will cause greater problems for American students in the next few years.
But we’re talking about a 20 increase in college costs next year. That would be a huge problem for many college students and not all the way to get more Americans through college. Isn’t there anther, far more responsible solution for this problem?