Senator Elizabeth Warren, a Democrat of Massachusetts, spoke up for poor and middle-class Americans last week when she excoriated the federal government for making money on the student loan program. She also criticized Republicans for killing bills earlier this month that would have prevented interest rates on subsidized student loans from doubling. Rates on those loans have jumped from 3.4 percent to 6.8 percent, further burdening one-third of all college students who use them to pay for an education.
During the last decade, Congress sensibly replaced a system of variable-rate loans with fixed rates that allowed families to know what their loans would cost. It set the rate on both subsidized and unsubsidized loans at 6.8 percent, but later ordered the rate on subsidized loans — two-thirds of which go to families with incomes under $50,000 — to gradually decline by half. The refusal of Republicans in both houses to renew the lower rate means that students who start college this fall and finish in four years will be saddled, on average, with an extra $4,000 in debt.
This increase in costs comes at a time when college debt has already reached record levels, damaging the economy and hobbling young graduates. It also draws attention to the fact that the federal government is making quite a lot of money from the loan program. An analysis by the Congressional Budget Office estimated that the new, higher rate would earn the government about $184 billion over the next decade, after taking into account program costs, including potential defaults…
The government should not be making money off the backs of struggling student borrowers. In the long term, the loan program needs to be restructured so that the loans are closely linked to the government’s actual cost of borrowing, which could reduce rates for students.
A Senate compromise bill that is supposed to address the harmful rate increase falls well short. The bill, supported by the White House, would temporarily lower interest rates, while raising rates in future years to make up for lost federal revenue…Ms. Warren got it exactly right when she said the bill pits students against one another, requiring future college students to pay for the financial break enjoyed by students who precede them. “I think this whole system stinks,” she said, summing it up.
The Senate bill should pass only if it includes a provision, offered by Ms. Warren and Senator Jack Reed, a Democrat of Rhode Island, that would cap most loans at the rate of 6.8 percent. If Republicans resist that, the Senate should leave the loan rate exactly where it is. Congress should not make matters worse than they already are.
Bad enough the whole of Congress doesn’t revolt over the idea of government making profit from a service that benefits the whole nation. There is nothing this land needs more than education. A quality that has only continued to diminish over the past half-century.
Elizabeth Warren has it right and the scumbag Party of NO is guilty as ever of trying to keep down ordinary American families and their children. Lay some heat on your elected representatives in Congress and make it clear to these layabouts that we need more than lip service to lead the fightback against the Great Recession. Let’s do it with an educated generation.