Student loan hike mired in politics
One of the more exasperating traits of our dysfunctional Congress is that even in those rare instances when members actually agree to do something, they can’t help but find ways to disagree how to do it.
This time it’s interest rates on federally subsidized student loans, which are scheduled to double – from 3.4 percent to 6.8 percent – on July 1, unless Congress chooses otherwise. If it doesn’t, the rate hike would affect an estimated 7.4 million college students, according to the White House, with the average student paying more than $1,000 over the terms of the loan.
Now who wants that – especially in an election year? Apparently, no one.
Not President Barack Obama, who reiterated that point Tuesday during a “slow-jamming the news” segment on “Late Night with Jimmy Fallon.” Not Republican nominee-in-waiting Mitt Romney. Not congressional Democrats. Not congressional Republicans.
Most have indicated they support extending for at least another year the College Cost Reduction and Access Act of 2007, which was signed into law by President George W. Bush and gradually lowered the interest rate on subsidized Stafford loans from 6.8 percent to 3.4 percent over four years.
So if everyone agrees, what’s the problem?
How to pay for it, of course, to the tune of $5.8 billion, according the nonpartisan Congressional Budget Office.
For the Democrats, Senate President Harry Reid, of Nevada, introduced a bill Tuesday that would maintain the 3.4 percent interest rate for another year. The measure would offset the cost by closing a tax loophole affecting shareholders of S corporations who earn more than $250,000 a year.
For the Republicans, Sen. Lamar Alexander, of Tennessee, filed a bill Wednesday that also would cap the rate for another year. He would offset the cost by tapping the health care law, requiring low-income people who get a larger subsidy to buy insurance than they should to pay more of it back.
So let’s see if we have this straight: Democrats want to pay for the extension by raising taxes on businesses; Republicans want to do it by tapping the president’s signature health care law.
Can you spell G-R-I-D-L-O-C-K?
That both sides would seek to turn this issue into a political advantage is as predictable as it is nauseating. With Election Day less than seven months away, this is just another vehicle to paint the opposing party as out of touch with voters.
Unfortunately, lost in the political haggling is that student loan debt is a real issue affecting the lives of millions of people – in fact, with estimates as high as $870 billion, it has eclipsed credit card and car loan debt, according to the Federal Reserve Bank of New York.
This is particularly true for nearly 38,000 borrowers in New Hampshire, which led the nation with an average debt load of $31,048, according to a report issued last year by the Project on Student Debt.
State students who borrow the maximum $19,000 in Stafford loans would end up paying $26,238 over 10 years – or roughly $3,800 more than at the lower rate.
Ultimately, we suspect Democrats and Republicans will come together to extend the 3.4 percent rate for another year – no doubt in the hours before deadline – if for no other reason than ticking off cash-strapped young voters and their parents is bad form in an election year.
Too bad we have to wait for both sides to exploit it before finding a more palatable way to do the right thing.