July 25, 2013 by
Last Wednesday, the Senate passed a “compromise” bill on student loans, 81 to 18, to tie the federal student loan interest rates to the market rates. The compromise would lower interest rates for subsidized Stafford loan borrowers now, but allow them to rise way too high in the long run—making it even harder for students to repay their loans.
While the White House has been billing it as a smart solution—the president himself calling. The Student Loan Certainty Act “a major victory for our nation’s students”—the “compromise” has been labeled by experts and advocates alike as “a bad deal.” Brent Staples of The New York Times reports why:
The Obama administration is championing the student loan overhaul passed by the Senate earlier this week as a wonderful thing. But there are two big problems with the new system. First, it lowers rates only temporarily, raising them in future years so that the government can continue to reap unseemly and unjustified profit from the student loan program. This means that future college students will be bled to pay for the financial break given to the students who preceded them…The second problem is that poor and middle class students who are already mortgaging their futures to meet escalating college costs are being asked to subsidize the federal government — when it should be the other way around.
For example, the loan program will generate about $185 billion for the federal coffers over the next decade. How much money is that? According to Shahien Nasiripour of The Huffington Post, annualizing the $185 billion figure through 2023 places “the U.S. student loan program among the 20 most profitable public companies in the world.”
Education secretary Arne Duncan argued lamely during a press call earlier this week that it was misleading to describe the gains as “profit” because the estimate of what the the government is likely to rake in is based on a projection.That was a desperate maneuver, intended to obscure an inconvenient truth.
The Huffington Post claims that officials from the Obama administration “stressed that the proposal was just the first in a series of steps they and congressional Democrats will take in the coming months to address record student debt levels and the rising cost of higher education” and that “a quick deal was necessary,” even going so far as saying that the Senate deal rejects calls to raise student rates to reduce deficit in their fact sheet. However, it’s no secret that they intend to do just that with $715 million they make in profits according to the Congressional Budget Office—all on the backs of hard-working students.
The White House stated that undergrads borrowing this year will save $1500 under the Senate plan. But in just five years, undergrads will pay $900 more.
And say you’re a future law student who enters college in 2018-19, manages to graduate in 3 years, and borrows the maximum amount of unsubsidized Stafford loans each year? You would end up paying $12,750 more over 10 years under the Senate-White House deal then under current rates.
So what gives?
“Congress should be doing everything they can to make college more accessible. Yet this deal makes it harder and more expensive for America’s future students to get the education they need,” said Christine Lindstrom of U.S. PIRG to the Huffington Post. But not all members of Congress agree. House Committee on Education and the Workforce Democrats earlier tweeted that Representative Virginia Foxx said “It’s not the role of Congress to make college more affordable and accessible.”
Her comment doesn’t bode well for next week, when the House is expected to vote on the bill, which they’re moving full-steam ahead with.
I’ll wrap up with an excerpt from Joan Venocchi’s article in The Globe. She speaks truth to power, and writes:
After listening to Education Secretary Arne Duncan make his pitch for a Senate compromise bill that lowers a July 1 hike in interest rates on student loans, I give him a C.It stands for “contempt” — because that’s what he showed for average American parents who are struggling to pay their children’s college tuition with whatever money they can scrounge up.