Student Loan Subsidies Redux: For Just $10 a Month, You Can Subsidize Privileged Children


George Will looks at the latest fooferaw over subsidized federal student loans, which includes the humanitarian intervention of keeping loans at 3.4 percent fixed interest rather than going back to the pre-2006 level of 6.8 percent:

The average annual income of high school graduates with no college is $41,288; for college graduates with just a bachelor's degree it is $71,552. So the one-year difference ($30,264) is more than the average total indebtedness of the two-thirds of students who borrow ($25,250). Taxpayers, most of whom are not college graduates, will pay $6 billion a year to make it slightly easier for some fortunate students to acquire college degrees.

The standard payback period or such loans is 10 years. What's the difference in monthly interest payments between 3.4 percent and 6.8 percent?:

The 6.8 percent rate – private loans for students cost about 12 percent – was itself the result of a federal subsidy. And students have no collateral that can be repossessed in case they default, which 23 percent of those receiving the loans in question do. The maximum loan for third- and fourth-year students is $5,500 a year. The payment difference between 3.4 percent and 6.8 percent is less than $10 a month, so the "problem" involves less than 30 cents a day.

Will also notes that the lower rate was the result of bipartisanship and that presumptive GOP presidential candidate Mitt Romney has already signaled his approval of keeping the rate at 3.4 percent, which costs taxpayers about $6 billion a year.

Whole column here.

Last November, ReasonTV offered up 3 Reasons Not to Bail Out Student Loan Borrowers. Take a look: