Breaking: Reduced Student Loan Rates Won't Be Offset by Cuts Elsewhere
The Wash Post spray paints the writing on the bathroom wall: "For a good time and low, low student loan rates, call Barack and Boehner."
The Dems and the GOP are both committed to keeping federally subsidized Stafford Loans for college students at the low, low rate of 3.4 percent fixed interest over a 10-year repayment period. That's down from 2007's 6.8 percent rate and the reduction will run out on July 1 unless Congress does something (private-market rates for student loans range from 6 percent up to around 12 percent for a fixed rate, a figure that presumably prices students' lack of collateral and credit history).
I ran the numbers on the 6.8 percent versus 3.4 percent here; on $10,000 over 10 years, it adds up to about $2,000 more. Given that the student borrower captures all the value of an expected increase in lifetime earnings (valued at somewhere between about $250,000 and $1 million), it seems fair that they foot the higher interest rate. Hell, at the 12 percent rate, the difference is just $5,400 more over 10 years. Still a good deal for motivated students (and one that doesn't put taxpayers on the hook for defaults or subsidies).
In any case, the GOP has proposed various ways to pay for the extension of the 3.4 percent rate, including:
In one proposal, the cost would be offset by increasing the amount federal workers pay for their retirement.
In the other, a freeze on loan rates would be paid for through a combination of items: shortening the period during which part-time students would be eligible for federally subsidized loans; limiting the ability of states to recoup Medicaid costs through taxes on providers, which would lead to a slight reduction in Medicaid use and, therefore, lower costs to the federal government; and improving coordination with states and local governments to reduce Social Security overpayments.
To which Arne Duncan, the secretary of Education, issued this great statement, worthy of the double-speaking nuns who taught me so well at St. Mary's and Mater Dei High School in New Monmouth, N.J.:
"If they are not serious proposals, they are not ones we will take seriously."
The only thing missing was an invocation of the great mysteries whose answers will only be revealed to us once we are one with God in Heaven (which won't happen if you keep asking so many questions!).
So the Dems don't want to discuss actually paying for the continuation of the lower loan rate (which a Democratic Congress insisted on sunsetting when passing it five years ago). How do we know that the GOP will ultimately cave on just going along with the lower rate? First off, they're Republicans. Second, the Wash Post (from which the above indented quotes are taken) writes
[Speaker John Boehner] added that the rate could be lowered retroactively if the deadline passes and said the GOP should not let the Democrats use the date to force a deal, said a person who was present at the meeting but was not authorized to speak about the matter publicly.
And I'm still asking: Why the hell should new student loan borrowers pay less than older ones? And, even more important, Why are we subsidizing loans for students in the first place? They get to keep the extra earnings they make, so it's only fair that they take on the extra risk, isn't it?