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March 13, 2012 5:53 PM The Secret Rate Hike

By Daniel Luzer

Unbeknownst to many Americans, this summer the interest rate on a very commonly held federally subsidized student loan will doubles unless Congress takes action.

Let’s see how eager Republicans are to take care of this problem. Let’s see how eager Democrats are to force the issue.

According to an Associated Press article in the Washington Post:

College students on Tuesday delivered more than 130,000 letters to congressional leaders asking them to stop rates from increasing from 3.4 to 6.8 percent. The rate hike affects new subsidized Stafford loans, which are issued to low and middle income undergraduates. They hope to raise enough awareness to get Congress to stop it.

This is not a surprise at all. Members of Congress have known this would happen for years. Indeed, they may have designed it to happen. As the article explained:

With many lawmakers acting on a campaign promise, the Democrat-controlled Congress in 2007 passed legislation to progressively lower the rate to 3.4 percent this school year.
Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, has said the looming hike is the “result of a ticking time bomb set by Democrats five years ago” and that “simply calling for more of the same is a disservice to students and taxpayers.” Jennifer Allen, a spokeswoman for Kline, said in an email that we, “now face the exact predicament we expected: we must either allow interest rates to rise on student loans, or stick taxpayers with another multi-billion dollar bill.”

Apparently the Congressional Budget Office figured that keeping the rate low would cost about $6 billion, every year.

Actually, Allen, you’ll be sticking taxpayers with another multi-billion dollar bill either way; it’s just a matter of whether you spread that bill over the entire population, which would be much less painful, or whether you stick the full cost on struggling college students and graduates. What would be the most responsible public policy?

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • Just Dropping By on March 15, 2012 11:48 AM:

    Sorry, but as someone who had to pay 8.25% interest on his own Stafford loans for undergrad school in the 1990s, I'm having a hard time getting worked up about the possibility of the rate going up to what would have been the equivalent of a substantial discount on the rate I paid.

  • neil b on March 18, 2012 7:46 PM:

    JDB, you should be a Randian Republican, with that f**K everyone else attitude. So if you didn't get a certain break or good deal, then you don't give a damn about hoping someone else can keep theirs?