Duffy Op-Ed: Political gamesmanship could double student loan interest rates
Playing petty political games rather than working to resolve issues on behalf of the nation is precisely why the American people are sick and tired of Washington D.C. And while there are many examples of this dysfunction from which to choose, the recent debate over extending for one year the current rate for federal student loans is just the latest.
This current situation stems, in part, from how the interest rates have been calculated over the last decade. Through changes made to the Higher Education Act, Congress was put in charge of setting all terms and conditions on federal student loans. So, rather than letting the markets decide the rates, Congress makes the decision.
In 2007, Democrats in Congress set incrementally lower interest rates eventually lowering down to 3.4 percent for the 2011-2012 academic year.
If this rate were determined by the market, it’d likely mirror the historically low rates of car loans and home mortgages and remain that way next year.
Instead, on July 1, this interest rate on federal student loans will double, instantly raising the cost of college education for millions of young Americans — unless Congress acts.
As the tenth of eleven children, my parents were not in a financial position to pay for my college education so I know full-well the importance of these loans. In addition to working various part time jobs throughout college and law school, I took out loans. In fact, I’m still repaying them.
But the looming hike isn’t due to inaction by the House of Representatives; we passed a one-year extension of the current 3.4 percent rate back in April.
Unfortunately, we’re at this impasse because the Senate refuses to consider the House measure and Senate Democrats and this administration would rather have the ‘disagreement’ for the fall elections over which party is in favor of helping college kids, rather than actually helping college kids.
Both sides say they agree an extension needs to happen, but disagree over how to pay for the $6 billion measure. The House version covered the one-year cost of the extension by eliminating an unnecessary slush fund from the Obamacare health reform legislation. Senate Democrats and the administration conversely have offered to pay by raising taxes on small businesses.
Certainly, we’ll need to compromise — and short of raising taxes — I think we can find common ground. Given the current economic climate, the need for Congress to find a way to pass this extension couldn’t be greater. Tuition and fees at public four-year colleges and universities has increased approximately 72 percent since 2001 and more and more students are taking out loans to pay for school.
Last year, more than $169 billion in federal financial aid was disbursed to undergraduate and graduate students, up 81 percent since 2005.
I also voted for the House extension to give the students a one-year respite on a higher fee because they’re entering one of the worst job markets in a generation. The economic policies pursued by this administration and their allies in the senate for the last four years, everything from the failed trillion-dollar stimulus measure to Obamacare and its billions of new taxes and fees on small businesses, have done virtually nothing to lower unemployment and create new jobs.
We’re not that far apart on this issue. I would urge my colleagues to put political gamesmanship aside and work together to find a solution to prevent this hike we all agree should be avoided.