Editorial: Congress should jump to fix student-loan hike
Editorials June 16, 2013 5:04PM
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Updated: July 18, 2013 6:12AM
Pretty much everyone agrees that America’s $1 trillion mountain of student debt is not only a lamentable burden on young adults but also a significant drag on the economy.
But the usual gridlock in Washington threatens to add to all that debt by letting rates on subsidized Stafford loans double from 3.4 percent to 6.8 percent on July 1.
Congress instead should focus on ways to make college educations more affordable. To compete in a global economy, America needs more of its young people to get college educations. It doesn’t need to create new barriers.
The federal program that keeps the Stafford interest rate at 3.4 percent was written with a sunset clause that has been extended year after year. But this year, Senate Republicans filibustered yet another extension.
Instead, House Republicans passed a bill that would replace the old fixed rate with a variable rate tied to the market, but higher. The problem with that is — if Congressional Budget Office interest rate predictions are correct — students taking out new loans would wind up paying even higher interest than if today’s fixed rates doubled. By 2017, interest rates are projected to rise to 7.4 percent and then keep going up.
Devising an effective student loan program isn’t easy. In the past, some institutions, particularly unscrupulous for-profit ones, have enticed students into taking out loans and then left them with nothing but a pile of debt.
But the Senate Democrats have a workable solution: Keep the rate at 3.4 percent for now and revisit the issue in two years when the Higher Education Act is up for renewal and all the factors that drive up college costs can be considered. Congress should pass that bill.