Tuesday, June 11, 2013
The U.S. Senate recently shot down two proposals that would have addressed a looming deadline that, if broken, would allow the rate charged for certain student loans to double. The end result of Congress’ inaction would be that millions of students attending college in the coming academic year might accept a far higher debt burden in order to do so.
The total amount of student loan debt eclipses that of American credit card debt and recently topped $1 trillion, demonstrating the broken system of financing higher education. Lawmakers should not allow the problem to become worse, not when the ability to provide relief and invest in the next generation stands clearly before them.
For years there existed a workable arrangement between universities, students and the federal government by which schools charged higher tuition paid through subsidized loans. High employment rates for graduates ensured repayment over time thanks to the earning power of a degree. When the job market dried up, however, the system broke, leaving many recent graduates without the salaries needed to offset skyrocketing tuition.
One of the most popular ways of paying for a higher education is through Stafford student loans. The subsidized type charges a 3.4 percent interest rate and is determined through a formula that determines financial need. About one-third of college students accepting loans use subsidized Stafford loans, which totaled an estimated 7.4 million borrowers in 2012-13.
Unless Congress acts before July 1, the rate charged for future subsidized Stafford loans will double to 6.8 percent, the same rate charged for other types of financial aid. There are several competing plans to address that change, including one from President Barack Obama and one from Rep. Virginia Foxx, who co-sponosred a bill approved by the House.
There is no clear indication if an agreement will be reached — recent history inspires precious little hope — but the latest episode highlights the broken system of funding higher education and its impact on the national financial landscape. That was arguably the most salient point raised during the Occupy Wall Street protests and one that should bring lawmakers together.
East Carolina University serves a great number of low-income students who would be adversely affected if the rates for need-based financial aid are allowed to rise. Pricing these promising young men and women out of higher education would speak volumes about opportunity in this society and the inability of Washington to find reasoned common ground.
via The Daily Reflector.