The Student Loan Farce Robert A. Levine 8-5-13 Last week, members of Congress got together and actually passed a bill which will be signed by the President. It was enacted in the House by a vote of 392 to 31 with astonishing bipartisan support. In the Senate, it was approved by a vote of 81 to 18. This is something that Congress believes it can be proud of. But can it? We should remember that in the past, Republicans in Congress opposed the removal of banks from the loan process, which was a no-risk bounty for these financial firms since the loans were guaranteed by the federal government. Their participation merely increased the cost of administering these loans, rather than having the education institutions do it directly. But heaven forbid a source of no-risk income should be taken away from the banks. In terms of the recent battles over student loans, initially Congress could not agree on how to finance them and rates were allowed to double from 3.4 percent annually to 6.8 percent when a relief bill could not be enacted. Of course, this placed a greater burden on the poor and middle-class students who depend on these loans for their college educations. Because of pressure from constituents, members of Congress found a plan that both parties could agree on. Arbitrary fixed interest rates were ended and the rates of the loans were tied to the market, specifically the ten year Treasury note at the time the loan was made. The rates for loans currently are 3.9 percent for undergraduates 5.4 percent for graduate students, and 6.4 percent for PLUS loans. Caps for the loans were set at 8.25 percent, 9.5 percent, and 10.5 percent respectively. While the current rates may be deemed reasonable, rising rates in the future may make student debt even more of a burden and possibly price many students out of a college education. Once again, Congress missed the boat on student loans. The government should be doing all it can to encourage students to obtain a higher education, as an educated populace is needed to compete in a global world. It’s good for the individuals who go to college as they earn more, and it’s good for the nation. While many in Congress feel that the government should not be subsidizing citizen’s education given the high national debt, the government should also not be making a profit on student loans. The loans should be offered at the lowest rates possible that allows the government to break even. And since we need Americans to major in the STEM fields (science, technology, engineering, and mathematics), perhaps students who are interested in these subjects should be subsidized to further encourage them to become scientists, engineers, and so forth. According to a report in The Economist in December of 2012, America was only 15th in the proportion of its younger citizens with a higher education. The nation can do better in making certain that every citizen who wants a higher education is able to afford one. And we do not want to chain our young educated people to piles of debt that will burden them for years afterwards, retarding any entrepreneurial urges they might have. Instead of Congress patting itself on the back because it passed a bipartisan bill for a change, the institution needs to get its priorities straight on the student loan program. Resurrecting Democracy robertlevinebooks
Posted on: Mon, 05 Aug 2013 14:47:36 +0000
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