Once again, Congress is facing a time-sensitive “cliff” deadline: July 1, when rates on federally subsidized Stafford student loans will double should Congress fail to act.
If this cliff sounds familiar, it’s because we were at the same brink last year during the election. A last-minute compromise — reached because no candidate wanted to be tarred with an anti-student label — froze the interest rate at 3.4 percent. But that will go up to 6.8 percent July 1 unless the White House, House Republicans and Senate Democrats can agree on either another extension or a new formula for setting rates.
The parties’ positions are far enough apart that it’s time to get nervous yet not so far apart that there isn’t hope that they can reach a compromise. But there’s no election hanging over their heads to spur them on. Everyone is making noises that seem to acknowledge how important it is to keep college affordable, so it would be truly unfortunate if they let partisan politics get in the way of students’ access to higher education.
It’s expensive enough as it is to go to college, with the average student borrowing almost $25,000 to earn a four-year degree. If the interest rate goes up, another $1,000 would be added to the cost of those loans.
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The last thing the nation needs is more hurdles in the way of students earning degrees. Doubling the loan interest rate is sure to add to the perception that college is too expensive and perhaps not worth the cost. But it is; over the course of a lifetime, the average degreed worker will earn hundreds of thousands of dollars more than one whose education ended at high school.
Society has a stake in making it financially feasible for students to earn a degree and not be weighted down with inordinate debt when they graduate. The national student debt level already stands at an astounding $1.1 trillion — and it’s the only debt that doesn’t go away if the borrower declares bankruptcy or dies.
How much more can graduates contribute to the economy if they’re not burdened by onerous student loan bills? Instead of paying debt and living in their parents’ home, they could be establishing households, renting or taking out a mortgage, and buying furniture and other disposable goods. All that contributes to a healthier economy and housing market.
According to the Congressional Budget Office, federal student loans generated a net gain to the federal government of almost $120 billion over the last five years. That’s a healthy return on investment. With the economy recovering, there’s no need to put an additional burden on college students to generate even more revenue.
Keep student interest rates low. It’s good for them and good for the nation to get them degreed, out in the workplace and as financially unfettered as possible.